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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 premium values.

The Company’s risks insured in the reporting year

Civil liability for nuclear and radiation damage Mandatory insurance
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 economic crisis.
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.


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