Risk management and insurance
The Company considers insurance a risk management tool. From
the risk management viewpoint, insurance is a form of risk transfer.
Insurance is used for low-probability, poorly managed risks, the
consequences of which may be significant for the Company, as well
as approved by applicable law. Voluntary insurance is chosen
through competition with preliminary justification of the risk-to-insurance
The Company’s risks insured in the reporting year
|Civil liability for nuclear and radiation damage
|Risk of loss and damage of the Company’s goods (both empty TUKs and TUKs with uranium products)
||The Company takes this risk under all contracts to the delivery point of customers as per its business practices. The ratio of this risk value (a product of probability and potential loss) and the insurance premium demonstrate the expediency of its insurance.
|Credit risk based on the partners who are clients for the Company’s products (the business risk), i.e. the probability of the Company’s partners to properly meet their cash commitments to the Company
||Since 2009, the Company has annually insured its credit risk with respect to
the partners who are customers of its uranium products (business risk) due
to the risk aggravation in the recent period of the global financial and
The Fukushima-Daiichi NPP events also raised its probability by negatively
affecting the ability of some partners of the Company to pay.
For insurance purposes, the Company estimates a probability of
inappropriate meeting by a partner of its cash commitments by one delivery
based on an analysis of the financial conditions and qualitative characteristics
of the partner’s business sustainability, as well as with consideration of credit
ratings of the partner or its parent company. The obtained estimation of such
probability is used to calculate the maximum insurance premium that is
acceptable for the Company. In 2013, the use of the Bayesian method to
estimate the probability of a default by contractors allowed for the reduction
of the insurance cost of this risk by RUR 30 million.
The banks in which the Company’s deposits are placed, as well as the
insurance companies, are selected through bids out of those recommended
by ROSATOM; their solvency is treated as a weighty non-monetary criterion.