The RNRC Concept: three hidden problems for industrial groups

The concept for reinsuring terrorism, sabotage and drone risks implemented by the Russian National Reinsurance Company (RNRC) has moved the market to strict standardisation. For the policyholder it looks like a technical change at renewal. In reality, the architecture of the whole insurance programme changes: limits, rates and which losses will be paid at all.

The key number to keep in mind: no more than one aggregate limit of up to RUB 50 bn per group of companies or single site. For a group with several production sites, port terminals and warehouses, this means the limit can no longer be seen as a feature of an individual policy. It is a shared resource divided among all contracts at the site.

Below are three problems that most often come to light only after a loss.

1. The “proportional trap”

When new insurance contracts appear at the same site — including contracts of third parties within the same production and logistics hub — the limits of all covers at that site are cut proportionally. The policyholder may not know about other parties’ contracts and learn about the reduction only during settlement.

The risk is particularly high where inventory is concentrated in someone else’s infrastructure: at ports, grain elevators and rail hubs. Cargo and equipment are insured at full value, but the payout comes as a fraction of it. Formally this is not a refusal, but the economic result is the same — underinsurance.

What to do. Before renewal, map your sites including neighbours in the hub, check how the policy defines the insured territory, and structure the placement so that cumulative sites are protected separately — for example, through combined first-loss programmes.

2. BI carved out

Business interruption losses and loss of rental income are fully excluded from subsidised reinsurance. For an industrial company this is often the largest part of the damage: a workshop can be rebuilt in months, but lost revenue and penalties under supply contracts keep accumulating all that time.

If the programme was built on the assumption that BI is covered together with property, after the switch to the new concept this risk effectively stays on the company’s balance sheet.

What to do. Assess potential BI for key sites separately and look for alternative capacity outside subsidised reinsurance. This is not only an insurance question but also one for your supply contracts: force majeure and delay liability clauses must be read together with the policy.

3. Penalty tariff package

Any drone or sabotage incident at a site since 2022 moves the risk from the preferential package No. 6 to the basic package No. 2. The consequences are a higher rate, a higher deductible and a larger insurer’s retention. The incident itself may have been minor and never even notified as an insured event.

What to do. Check the incident history for each site before negotiations start, understand which package the risk will fall into, and build this into the budget and the programme structure rather than learning it from the quote.

How we run the audit

We work in three steps:

• Step 1. We analyse how vulnerable the existing policies are to the new RNRC limit scale and propose a placement architecture without the “proportional trap”.
• Step 2. We check the policy wording for the risk of an allegation of “wilful inaction”: if management knew about orders or defects and did not budget for remedying them, a refusal to pay may be lawful (Art. 963 of the Russian Civil Code).
• Step 3. We select financial and legal mechanisms to compensate for lost capacity, including for BI.

Direct contact with leading underwriters and an understanding of the RNRC’s internal logic allow us to use special acceptances, form the risk pool correctly and get past limit barriers that a standard renewal does not see.

If your programme renewal falls in the coming months, it is best to run a rapid audit before requesting quotes: fixing the architecture after the terms are agreed is much more expensive.