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Russian pool raises terror limits to €41m

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The pool offering terrorism cover to Russian companies, the Russian Anti-Terrorism Insurance Pool, has increased its indemnity limits to 1.4 billion rubles (€41 million) from e25 million.

The pool, which was established in February 2002, provides reinsurance cover for terrorism risk to its 35 Russian and Commonwealth of Independent States-based insurance company participants.

It allows its members to offer terrorism insurance cover for property and fire damage resulting from a terrorist attack. Although the pool does not cover liability lines it does provide for business interruption losses where they arise from terrorism related property damage, according to Alexey Voronin, general business unit manager and senior account manager at Aon Rus L.L.C.

Property damage cover is also available for aviation, marine and energy risks as long as they are located on Russian or CIS territory, Mr. Voronin said.

Coverage is limited to Russia and CIS countries, excluding the Republic of Chechnya where Russian troops have fought two wars with Chechen separatist rebels over the past 12 years. The pool will also only pay out for losses if they are considered an act of terrorism under the Russian Criminal Code, according to Mr. Voronin.

Solitary case

But terrorist claims are rare in Russia, according to Mr. Voronin. "The only terrorism loss [I know that was] covered was two years ago when there was an explosion near a central Moscow hotel," he said. "A criminal case was filed and a reimbursement made," he added.

Mr. Voronin also said that the way the political situation works in Russia and some CIS countries, the authorities would not always want to recognize an event as a political event, rather choosing to attribute it to a "gas explosion" for example.

However, Mr. Voronin believes that the cover will be of interest to smaller investors constructing offices in Moscow or companies in the entertainment industry holding concerts and events in the country.

Russian primary insurers, as members of the RATIP, sell terrorism cover as an extension to traditional property damage insurance, although it can be sold separately. Premium rates for the terror cover are fixed at a minimum by the pool, although participants are free to charge a higher premium if they so choose, Mr. Voronin said. Buyers of the cover are also subject to a deductible, although these are usually set at the same level as the fire policy.

"Competition between Russian insurers is minimal since rates are more or less fixed and calculated based on the Russian Business Activity Classifying Code," Aon said in a statement. "For example, premium for an office building with the $25 million indemnity limit will be around $15,600 to $19,500 per annum."

Alternatively Russian companies could obtain terrorism cover from specialist insurers such as American International Group Inc. or in the London market, but this could be more expensive according to Mr. Voronin. "It is more expensive to go to AIG or London where premiums could be easily double," Mr. Voronin said.

Foreign insurers can also offer cover backed by the pool. "Certain foreign insurers operating in Russia have co-insurance agreements with the pool members and can include terrorism risk coverage into their property damage insurance program," Aon said in its statement. "However, even if the original policy is issued by a foreign insurer, the Russian pool member is indicated as a co-insurer for terrorism and bears all of the risk—the foreign insurer does not bear any risk and is not obliged to make any reimbursements connected to terrorism."