The board of directors at Russia’s Agency for Home Mortgage Lending, or AHML, gave the go ahead at the end of December for the agency to create an insurance subsidiary – AHML Insurance. The AHML will provide 1.5 billion rubles of the new insurer’s start-up capital, the agency said. The business plan endorsed by the AHML’s board envisages the new company insuring 12,300 mortgages in 2010. From January to November 2009 the agency refinanced 22,613 mortgage loans.

Leonid Vekshin, the AHML’s deputy director general, has been recommended for the post of company president, while Nina Smirnova, the managing director of MRG Laif, an insurer, will take up the same role in the new organization. The first loans with a 10 percent premium will be issued by the summer, according to AHML plans. “The insurance company will compensate banks for their losses if a bank cannot retrieve the value of a loan when selling a property it has reclaimed,” explained Alexander Semenyaka, the AHML’s general director. Currently banks are only offering loans for 70 percent of a property’s value, but mortgage insurance will allow them to increase this to 90 percent of the value, as it was before the crisis. The difference of 20 percent and the associated risk is being transferred from the bank to the insurer, explained Semenyaka.

In order to minimize any conflict of interest between the AHML and its insurer, the board has recommended offering the Association of Russian Banks and the National Insurance Guild the opportunity to become cofounders of the subsidiary. Their representatives could not be reached for comment.