Fitch Ratings says a record number of claims on insurance policies covering financial risks at Russian travel agents in July-August 2014 highlights the risk insurers undertake by covering bankruptcy risks. While total claims are manageable at the sector level, they may erode the capital of a few small, less disciplined insurers. The follow-up discussion in the local insurance sector has been focused on the need to raise supervisory standards in the tourism industry. But Fitch believes that Russian insurers could benefit if they also undertake a broader review of their underwriting approach to financial risks and, in particular, bankruptcy coverage. This is because such coverage does not generally fall within the usual non-life portfolios. In Russia this type of coverage is driven mainly by demand that arose after government licensing for a number of industries was recently replaced by self-regulation. A liability policy, which in effect covers financial risks including bankruptcy, has become a barrier to entry for self-regulating associations and can only be substituted with a bank guarantee, which tends to be more expensive for members (i.e. travel agents) of the associations. Fitch highlights the complex nature of this line of insurance business, including a number of challenges, some of which are general and some which are specific to the Russian market. The general challenges include a high probability of maximum loss in the event of a claim, significant contagion risks within some industries, and limited availability of reinsurance protection of an acceptable quality. The Russia-specific challenges include nascent self-regulation standards in the covered industries, insufficiently strong legal basis for policyholders to defend themselves against being declared bankrupt, and the complexity of risk assessment due to weak fair representation standards. Contact: Anastasia Litvinova Director +7 495 956 7082 Fitch Ratings CIS Limited Valovaya Street, 26 Moscow 115054 David Prowse Senior Director +44 20 3530 1250 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email:; Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: Additional information is available on Applicable Criteria and Related Research: Russian Insurance Sector: Underwriting Discipline in the Spotlight here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM’. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.