Export Insurance Agency of Russia – EXIAR
In October 2011 the Russian government set up EXIAR, the national export insurance agency. The initiative was proposed by the state-owned Vnesheconombank (VEB), which owns 100 per cent of the EXIAR stock. The VEB group already includes Roseximbank, an export-import bank, which is actively involved in the exports of the Il-96, Tu-204 and An-148 aircraft. Nevertheless, it was decided that Russia needs a specialized insurance agency modeled on such old and reputable outfits as Germany’s EulerHermes, France’s COFACE, and Italy’s SACE. The Russian government has even issued a special resolution to the effect that EXIAR’s operations do not fall under the scope of the federal law “On the insurance industry”.
Russian system of government support for exports:
The existing Russian system of financial support for exports includes such instruments as government guarantees; government export credit; subsidized interest rates for export contracts; and insurance of export loans.
The government agencies that provide financial support to Russian exporters include the Ministry of Economic Development, the Ministry of Industry and Trade, and the Finance Ministry, in cooperation with VEB.
VEB offers long-term loans for large export projects. EXIAR was set up to insure Russian exports and foreign investment deals against various commercial and political risks. Roseximbank issues government-backed guarantees to exporters; and VEB Leasing facilitates leasing operations.1
VEB, which owns EXIAR, has given the new outfit an authorized capital of 30bn roubles (about 1bn dollars).2 The head of EXIAR is VEB deputy chief Petr Fradkov. The EXIAR board of directors consists of independent directors and heads of several Russian government agencies; the chairman of the board is First Deputy Prime Minister Igor Shuvalov.
EXIAR’s remit includes:
At present EXIAR has an insurance capacity of 300bn roubles, which will be distributed across the priority sectors of the Russian economy.
These priorities have been outlined in the EXIAR Development Strategy, which places a heavy emphasis on high-tech and innovative exports
EXIAR priority industries
In terms of regional distribution of EXIAR’s insurance capacity, Asia is the leader with 106bn roubles, followed by the CIS (64bn), Latin America (54bn), Eastern Europe (27bn) and Western Europe (5bn).
As of early 2013, EXIAR was providing insurance support to 15 separate export and investment projects worth a total of 500m dollars. In the near future EXIAR plans to extend support to another 40 other projects worth 3bn dollars.3 In an important milestone for government support of high-tech exports, Prime Minister Dmitry Medvedev has instructed the relevant ministries and the VEB bank to submit their proposals regarding the provision of government guarantees to the amount of 500bn roubles (including insurance and reinsurance operations) via EXIAR in 2014-2016 and until 2020, which includes the existing and projected portfolio of projects. A separate quota will be determined for EXIAR insurance operations to support Russian military exports.4 This is the first time the government has pledged to provide this kind of support to arms exporters. Amid growing competition on the global arms market, efforts by Rosoboronexport, the state-owned arms exports intermediary, must be backed by effective mechanisms of government support for Russian arms exports. EXIAR is one of those mechanisms.
According to media reports, in the 2014-2020 period total demand for EXIAR insurance coverage for leading Russian companies’ export projects is 2.3 trillion roubles, of which military exports account for 111bn.5 The companies that want to make use of government insurance support include Rosatom, Inter RAO UES, Power Machinery, Zarubezhvodstroy, and Tekhnopromexport (a division of the Russian Technologies holding company). Most of these companies hope to take part in building and/or upgrading thermal, nuclear and other power plants in foreign countries.
Existing EXIAR projects
One of the first insurance policies issued by EXIAR was for a pre-export credit taken out by a leading Russian maker of instruments from Novikombank for an Indian contract. Details of the contract and the nature of the exported products have not been disclosed. The EXIAR insurance policy covers the risk of the exporter failing to repay the loan owing to non-payment by the Indian customer, as well as political risks.6
In July 2012 EXIAR joined efforts to promote the future MS-21 passenger aircraft in foreign markets. The airliner is being developed by Russia’s Irkut Corporation in close cooperation with the United Aircraft Corporation (OAK), the United Engines Corporation (ODK), and other divisions of the Russian Technologies state-owned holding company, as well as some foreign component suppliers. On July 6, 2012 EXIAR signed a memorandum of cooperation with Irkut. Under the terms of the document, the two companies will develop a system of insurance coverage against commercial and political risks for future exports of the MS-21.7 Such insurance will enable buyers of the new Russian plane to secure cheaper financing.
In September 2012, during the Hydroaviasalon-2012 international exhibition, EXIAR signed a memorandum of cooperation with another Russian aircraft maker, TANTK Beriyev. The agency has agreed to provide insurance support for the international promotion of the Be-200 amphibious aircraft, which is being marketed as a search-and-rescue and firefighting plane.6
Another major national export project in which EXIAR is involved is export of Sukhoi Superjet SSJ100 airliners to Southeast Asian countries.9 The agency is taking part in a program to provide cheap financing for export deals. VEB is the operator of the whole project, which will make 2.5bn dollars available for SSJ100 export credit facility. In October 2012 the bank’s board approved the precise mechanism of cooperation under this project between the various VEB divisions, including Roseximbank, EXIAR, and VEB Leasing. Financing will be provided for up to 12 years with effective interest rates of 6.5 per cent or less (the rate includes the EXIAR insurance premium). These terms will be in line with the terms of similar programs offered by Embraer and Bombardier, the main competitors of the Sukhoi Superjet, to buyers from countries with the same level of risks.
Finally, in March 2014 EXIAR signed an agreement with Russian Technologies on insuring the state corporation’s export contracts against political and commercial risks. By the time of the signing of the agreement, EXIAR had already insured six export projects by various Russian Technologies divisions, worth some 1.5bn roubles.10 Almost all the divisions of Russian Technologies are involved, one way or another, in exports; in 2012 those exports reached 240bn roubles. EXIAR’s agreement with Russian Technologies therefore represents a tangible contribution to supporting national high-tech exports.
1. Meeting chaired by Russian Prime Minister Dmitry Medvedev on facilitating high-tech exports // http://government.ru/
2. EXIAR corporate website // http://exiar.ru.
3. Meeting on facilitating high-tech exports // http://government.ru/news/720.
4. Resolution approved at the meeting chaired by Russian Prime Minister Dmitry Medvedev on facilitating high-tech exports // http://government.ru/orders/856.
5. Government to provide 2.3 trillion roubles worth of insurance to exporters. Izvestiya, June 13, 2013 // http://exiar.ru/press/publications/536/.
6. Novikombank and EXIAR forge closer cooperation, December 29, 2011 // http://novikom.ru/ru/press/news/index.php?from44=2&id18=1538.
7. Irkut Corporation and EXIAR announce cooperation on insurance of MS-21 exports // http://exiar.ru/press/news/88/.
8. EXIAR takes part in Hydroaviasalon-2012 exhibition // http://exiar.ru/press/news/231./
9. VEB launches financing of Sukhoi Superject-100 exports. PRIME, December 13, 2012 // http://ria.ru/interview/20121213/914624243.html.
10. Prime News, March 26, 2013 // http://exiar.ru/press/publications/450/.
Centre for Analysis of Strategies and Technologies (CAST)