March 15, 2019, 20:58 / Finance

The auditor doubted the ability of IC Respect to continue its continuous work

The former largest insurer of developers received the first loss in eight years Danis Yumabaev

General Director of Respect Alexander Artamonov said that the Central Bank prohibited Respect from insuring developers / Vladimir Trefilov / RIA Novosti

The former largest insurer of developers, IC Respect, received a loss of 249.8 million rubles in 2018. against a profit of RUB 583.9 million. a year earlier, according to the insurer’s reporting. This is Respect’s first loss since 2011 (there are no earlier reports on the company’s website). The financial result was mainly affected by the fact that the Central Bank excluded the insurer from the list of companies entitled to enter into new contracts for liability insurance of developers, wrote Respect’s auditor, the Aurum company, in the conclusion to the reporting.

Respect was the leader in civil liability insurance for developers in terms of premiums, but in December 2018 the Central Bank prohibited it from engaging in this type of activity. Before the ban, the Central Bank "Respect" controlled about 70% of the developers' liability insurance market. More than 3,330 organizations have entered into contracts with Respect to insure construction projects; from January 2015 to October 2018, a total of 9,315 objects were insured, according to the company’s website.

The Central Bank did not explain why it excluded Respect from the list of insurers for developers. But in an interview with TASS, the general director of Respect, Alexander Artamonov, said that the Central Bank prohibited Respect from insuring developers due to the presence of an order to eliminate violations related to refusals or delays in payments.

For Respect, insurance of developers was the main business in 2018, according to the audit report of the Aurum company, published on the insurer’s website. And this, as the auditor notes, “indicates the existence of a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.”

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Finance/Insurance

Respect's fees, according to the Central Bank, last year amounted to 8.5 billion rubles, of which 92% came from developers, as noted in the note to the audit report. Payments, according to the Central Bank, amounted to 161.4 million rubles.

Artamonov, in a conversation with a Vedomosti correspondent, refused to comment on the audit report. The company shares the auditor’s opinion, a Respect representative told Vedomosti. He expects that the portfolio of civil liability insurance for developers will be transferred to the Fund for the Protection of the Rights of Citizens - Participants in Shared Construction. Such a norm is in the bill of the Ministry of Construction and the Central Bank, said Nikolai Nikolaev, chairman of the State Duma’s specialized committee on natural resources, property and land relations.

A representative of Aurum promised Vedomosti to provide additional comments. The Central Bank does not comment on existing companies.

A reservation regarding the company’s ability to continue its continuous activities does not mean that the insurer will necessarily stop it, says Alexey Yanin, managing director of the insurance and investment ratings department of Expert RA. “However, this is a fairly serious step for an auditor, and auditors do not make such reservations without grounds,” he points out.

This is not the first time that the auditor has expressed a qualified opinion regarding Respect's reporting. At the beginning of 2018, the conclusion was published by the Inteko-audit company. It spoke about the difficulties that Respect may have in fulfilling its obligations: the auditor recognized the diversification of the risk of Respect's insurance portfolio as insufficient. In addition, the auditor did not like Respect's investment strategy. In 2017, it brought a loss to the insurer (1.7 billion rubles, according to the company’s reporting): he invested his own funds in derivative financial instruments, the conclusion said. A representative of Respect did not agree with the auditor’s opinion at the time.