Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Court Stops Privatization Of Russia's Largest Insurer

A federal court has halted a privatization plan that would have given company managers at Russia's largest insurer, Rosgosstrakh, a substantial chunk of the company at throwaway prices, officials said Tuesday.

The decision reverses a Moscow court ruling made last November in favor of the company's managers, who established a firm, RGS-Trust, to take part in the privatization. The case was brought by the Privatization Ministry and the State Duma's Audit Chamber, which published a report last May about irregularities in the privatization.

"Rosgosstrakh will remain government property for the time being," a Privatization Ministry spokeswoman said, commenting on the decision.

After the ruling was handed down last week, the ministry fired Rosgosstrakh head Vyacheslav Reznik for "mismanaging" the company and trying to press ahead with privatization despite its disapproval.

Rosgosstrakh officials refused to comment, saying only that the company's position will be clarified soon.

Rosgosstrakh's privatization plan last year raised much hue and cry when it became evident that employees and managers were preparing to snap up 50 percent of the company at 2 percent of the price outside investors would pay.

Under the plan, 20 percent of the insurer's shares were placed with workers for 2.13 million rubles ($366,000), while the company's managers would buy 30 percent through RGS-Trust at a price of 3 million rubles. In contrast, the auction of the remaining 50 percent was to have raised 300 million rubles.

The attraction of Rosgosstrakh is clear. With 55 million policyholders and 1996 premiums worth $700 million, the company is clearly poised to benefit from a predicted boom in Russia's insurance sector.

The court's decision can be considered a victory for the State Duma, which has been agitating for the privatization to be stopped.

Sergei Burkov, head of the inspection department at the Audit Chamber, said the court had upheld practically all the chamber's observations.

Burkov said the privatization decision would be made only after a presidential decree. The Duma, parliament's lower house, is now considering a law on the privatization of insurance companies. "I don't expect Rosgosstrakh to be privatized any time soon, not before 1999 at least," he said.