Fitch Ratings said it has downgraded six Russian insurance companies' insurer financial strength ratings, along with the debt rating of one Russian insurer.
The companies are insurance joint stock company VSK, JSC IC Allianz, AlfaStrakhovanie Plc, Soglasie Insurance Co. Ltd., Russian National Reinsurance Co. and Euroins Ltd.
Last week, Fitch's downgraded Russia's sovereign ratings to "C" and its country ceiling to "B-," reflecting the agency's view that a sovereign default is imminent.
Fitch's downgrades of Russia's sovereign and country ceiling is based on a Russian presidential decree March 5, which could force a redenomination of foreign-currency sovereign debt payments into local currency for creditors in specified countries, as well as Central Bank of Russia regulation that has restricted the transfer of local-currency government debt coupons to non-residents since late last week.
Fitch said that all six Russian insurers' policyholder obligations are primarily denominated in rubles, but also include some obligations that are denominated in foreign currencies. Fitch is assuming a portion of the policyholder obligations of all of the insurers could be exposed to payment restrictions as a result of the decree and transfer restrictions. Fitch has put all of the IFS ratings at "CC" to reflect this risk.
The ratings company also said the downgrades primarily reflect a further weakening of the operating environment of the Russian insurance industry caused by deepening sanctions and Russia's policy responses. The sovereign downgrade has a negative impact on Fitch's assessment of Russian insurers' investment and liquidity risk, primarily through exposure to state bonds and local securities markets.
