OREANDA-NEWS. April 06, 2010. The city of St. Petersburg hosted a roundtable discussion "Supporting Real Economy. Leasing as Financing Method", where Ms. Natalya Podgornaya, chief specialist of the leasing partner relations department in the North-Western Directorate of OJSC IC ROSNO made a report. The event was organized by the media holding Azhur, together with the newspaper "MK v Pitere" and the publishing house TT Finance.

The roundtable participants, among them representatives of the municipal administration and financial organizations, discussed the current state of small and medium business in Russia, and, in particular, in St. Petersburg; the problems faced by entrepreneurs, and such important financial instruments as loans and leasing. The insurance coverage of leasing objects was also discussed.

In the experts’ opinion, the liquidity crisis has certainly caused the leasing and commercial lending market to squeeze. Nevertheless, owing to stabilization in the financial sector, the leasing market may grow 10% to 15% in 2010. It is expected that market figures will reach pre-crisis level no earlier than in 2012. The growth of the leasing market might be partly driven by the following factors: easing of tax restrictions, state subsidies under the jointly implemented programs for subsidizing and increasing financial assistance by the banking sector.

The roundtable participants commented on the market situation. In their opinion, the major consequence of the crisis, the absence of free liquidity, has largely affected the leasing companies, which form part of the economy’s financial sector. As a result, commercial firms have lost ability to conclude leasing agreements on acceptable market terms. In addition, many lessees were deprived of funds requiring for making leasing payments, thus resulting in seizure of their machinery by lessors, who then resold the same. Some leasing companies had to suspend handover of leased items. Correspondingly, the volumes of premium collected by the insurance companies operating in this segment fell likewise. Comparing the pre-crisis period (early 2008) and late 2009, one may discover that the market slumped by at least 30%.

OJSC IC ROSNO attributes the prospects of this type of insurance in 2010 to 2012 to restoration of leasing as the major financial instrument of economic growth. Above all, we should expect recovery in automobile industry, cargo transportation, leasing, construction machinery, railway transport, energy equipment, which will affect small and medium business in the first place. Stable situation will be observed in the companies having access to financing — such as companies formed by large banks (above all, state-owned banks), and companies with foreign capital, including those founded by equipment vendors. The growth in large business insurance will occur gradually, in line with overall economic recovery.

According to Ms. Natalya Podgornaya, chief specialist of the leasing partner relations department in the North-Western Directorate of OJSC IC ROSNO, insurance coverage of the leased item is most relevant in case of high-risk objects: transport vehicles, special-purpose machinery and rolling stock, which stems from high accident rate characteristic for motor insurance as such. By purchasing an insurance policy, the lessee is able to protect its financial resources against such risks as theft, stealage, damage, and fire. Thus, lessees insure their interests to secure obligations under leasing agreements, in order to avoid being left at loose end and with indebtedness to the leasing company. ROSNO’s expert also explained that the company has contemplated certain options decreasing the cost of insurance policy. use of deductible; an option to limit the list of drivers in case of passenger car insurance, thus enabling the cost of insurance to decrease on average by 10%. The company also offers insurance payments by installments, with no surcharge ratios.

The volume of the leasing insurance market directly depends on the overall performance of the leasing market. Prior to the summer of 2008, analysts forecasted leasing to grow to 8 bn. US dollars across the Russian Federation. The crisis breaking out in the autumn of 2008 made its corrections: with a commencing recession and a shrinking market, the planned growth failed to realize. According to the expert estimate made by Ms. Natalya Podgornaya, only as much as 40% of all leased items in the North-Western Federal Okrug and no more than 70% of all leased items in Russia have been insured.

The roundtable discussion was attended by Promsvyazbank (St. Petersburg branch), Sberbank of Russia (North-Western branch), Expert Council of the St. Petersburg Union of Entrepreneurs, International College of Lawyers, Small Business Development Agency, Small Business Lending Fund, and other organizations.