XPRIMM: How the Analytical Credit Rating Agency (ACRA) is planning to become an alternative to the international rating agencies for the Russian companies?
Ekaterina TROFIMOVA: ACRA has never positioned itself as an alternative to international rating agencies or a sole provider of credit ratings on the Russian market. Our current niche is national scale credit ratings that will be assigned in accordance with ACRA's methodologies and in full compliance with the local legislation. We are the first rating agency that has filed all the required paperwork with the regulator (The Central Bank of Russia) and now awaits inclusion into the registry. The latter will allow us to operate on the local market of national scale ratings in the capacity of a registered provider of credit rating services.

XPRIMM: Is there a difference between the methodology of the "Big 4" and methodologies of ACRA regarding assessment of ratings assigned to insurance companies on the Russian national scale?
Ekaterina TROFIMOVA: It isn't really our job to analyze and compare methodologies of international agencies. ACRA's methodology fundamentally differs from the ones used by international peers due to the very fact that it is based on the national scale. This is what distinguishes our approach as a more detailed one allowing for fine tuning, with the local market peculiarities being accounted for. The approaches used by international agencies are intended to rate local companies on the international scale and then map international credit ratings to national scale equivalents. This levels off the differences between the rated entities - the differences that would certainly be accounted for by ACRA's approach. Hence, ACRA can calibrate credit risk assessment to a much broader number of categories, while ratings assigned by international agencies are clustered into few low-grade categories.

XPRIMM: What are the advantages for the market in strengthening the state control over the rating industry in Russia?
Ekaterina TROFIMOVA: It would be misleading to describe the current changes in legislation related to the rating industry in Russia as "strengthening the state control". In fact, the Federal Law №222, that regulates activities of rating agencies, virtually mimics relevant European regulation (ESMA requirements) and is more focused on professional standards in the rating industry rather than putting agencies under control by the regulator or any other federal body. The key issues addressed by the Federal Law №222 are transparency and consistencyof methodologies, the presence of compliance controls and the ways to avoidconflicts of interest. These are universal standards that must be adhered to by all players in order to provide the market with quality assessment of credit risk. The issue of regulator's interference with the rating process has been separately addressed by the law, which states that only consistency of rating methodology application is to be tested by the Central Bank on a regular basis. The actual decision regarding a credit rating and its rationale is at sole rating agency'sdiscretion.

XPRIMM: Russian insurers will have to include in their treaty reinsurance programs a mandatory 10% share to be transferred to the National Reinsurer, which has no rating yet. How will this influence competitiveness of Russian programs on the international market?
Ekaterina TROFIMOVA: ACRA issued a special commentary devoted to consequences of the NRC`sinception and new regulation for insurance market "National Reinsurance Company - a positive move with no dramatic changes to the reinsurance sector", August 17, 2016, which is available on our web page www.acra-ratings.com. First of all, we believe that large companies will retain leading share in Russian programs, while the reinsurance premium for the NRC will be formed via reducing the share of other international and Russian smaller reinsurers that are not contract leaders. Thus, the competitiveness of the Russian programs on the international market can increase because the international expertise and quality of underwriting will not change while demand for capital will decline.

ACRA also believes that the position of the NRC on the Russian insurance market will allow the latter to assume a role of risk aggregator for certain types of insurance. Although NRC officials claim that the company is not going to enter into retrocession contracts at the early stage, this role can be effectively used later for packaging risks in large and diversified programs for transferring to the international markets.

So we see positive effects for positioning of Russian programs on the international market.

XPRIMM: What are the main goals and strategy for further development of the Analytical Credit Rating Agency?
Ekaterina TROFIMOVA: As of now, ACRA's primary goal to deliver high-quality rating products to the Russian financial market and is to become a national champion on the local credit ratingmarket. To fulfill this task, we need to prove to the market our expertise on credit risk issues and become a point of contact for the professional community when an independent, insightful and value-added opinion is required not only on credit risk matters, but also on general economic and financial issues. We are fully equipped for the task in hand, both in terms of highly professional team and original credit rating models and methodologies. ACRA's mid-term objective is to expand its presence to the adjacent markets via various forms of cooperation with supranational institutions, other local rating agencies and local regulators. We believe that our expertise in credit risk analysis, as well as accrued experience in building up a national rating agency, will be of value to such counterparties.