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. Last Updated: 07/27/2016

Kremlin Asserts Role in Rosgosstrakh




The appointment of First Deputy State Property Minister Alexander Braverman last week to lead state-owned insurer Rosgosstrakh shows the government's efforts to control a firm dogged last year by scandal and a disappointing fiscal performance, an official said Wednesday.


"Rosgosstrakh is 100 percent state-owned and therefore the government needs to safeguard its interests in the company," said Rosgosstrakh spokesman Leonid Vititnev.


Braverman, already a member of Rosgosstrakh's board of directors, was appointed chairman while two Finance Ministry officials obtained new seats on the board.


The board's expansion is part of a drive to supervise the company's activities after a probe allegedly found financial irregularities committed by former managers, Vititnev said.


It is the second significant change in the company's management this year. In February, former chief executive Vyacheslav Reznik was sacked for mismanagement and replaced with Valery Sukhov of the Finance Ministry.


The moves follow last year's failed privatization of the company, halted by a court after it became evident that managers and employees were planning to buy 50 percent of the company for prices far below market value.


The negative publicity, coupled with a new law governing insurers which many of Rosgosstrakh's 80 subsidiaries will not meet next year, means any plans to sell the company are extended ones.


"The privatization question is not closed, but it will probably not happen for the next two years at least," Vititnev said.


A spokesman for the State Property Ministry said Wednesday that there is no immediate plan to privatize Rosgosstrakh.


Company officials have blamed last year's scandal for Rosgosstrakh's relatively poor 1997 performance, with premium revenues growing by just 5 percent compared to 25 percent average growth for the sector. The company earned $500 million in premiums last year.


Sukhov has said he favors majority state ownership in Rosgosstrakh and advocates delaying the sell-off until the company's financial condition improves.


While the State Property Ministry currently values the company between $150 million and $200 million, it has said it would like to raise much more.


One pressing problem concerns Rosgosstrakh's 80 subsidiaries, many of which do not meet minimum charter requirements of $500,000 stipulated by Russia's new insurance law.


The law, which takes affect Jan. 1, 1999, is aimed to make undercapitalized Russian insurers more competitive. Russia is supposed to liberalize market access to foreign insurers in 1999.


Vititnev said Rosgosstrakh is pondering three alternative solutions to the problem of minimum capital requirements.


"Asking the government for funds is probably not feasible," he said. "So we shall either invite outside investors [to buy into the subsidiaries], or organize mergers among the subsidiaries."