'Apart from the requirement regarding the need for the insurers to build up on capital quantity wise, they must now pay attention to the quality of this capital as well. I believe the order on cancelling a company’s license if it fails to meet both demands should be ready within a month’s time,’ head of Insurance Authority in Ural Federal District Vladimir Ostrovskiy says.

'An insurance company might have some real estate or promissory notes provided by banks and large dependable companies to fall back on. A lot of insurers, though, took to using promissory notes of insolvent companies or bills receivable of some legal bodies to create the illusion of having some nice authorized capital. Insurers can sometimes even exchange promissory notes with each other. Our inspections revealed that about one-tenth of the region’s insurers fail to meet the requirements we impose in terms of capital quality,’ Mr. Ostrovskiy notes.

'As I said, in case an insurance company fails to meet the demands on the quality of their capital, its license will have to be called off. This insurer will then have to either have its license restored or yield its portfolio to another player within the course of six months, whereupon the business will have to close down,’ Mr. Ostrovskiy observes.