Type C account (Russia)
Created by Russian Presidential Decree No. 95 of March 5, 2022, the type C account receives in roubles the sums owed to creditors from "unfriendly" countries, who can do almost nothing with them.
A type C account is a special rouble account opened in Russia in the name of a creditor linked to an "unfriendly" state, into which the Russian debtor pays what it owes while the money cannot leave. Presidential Decree No. 95 of March 5, 2022 sets a temporary procedure for Russian debtors owing money to foreign creditors linked to states that commit "unfriendly" acts. The same day, Government Order No. 430-r drew up the list of those states; it has grown since. Dividends, coupons and redemptions due to these non-residents land in that account, and the Bank of Russia allows only a handful of operations out of it. On the Russian side the debt is discharged; the money stays put. Decree No. 844 of November 8, 2023 opened a narrow valve: a foreign investor can use those roubles to buy blocked foreign securities held by Russians, through auctions and within a cap of 100,000 roubles per portfolio. For a political risk underwriter, the type C account is the textbook currency inconvertibility and transfer restriction event: the debtor pays, the local currency exists, but it can be neither converted nor transferred. The loss is established after the policy's waiting period, often long, and the dispute moves to causation. The measure is Russian, which puts it in principle within cover. Yet it presents itself as a response to Western sanctions, and the insurer will look at its sanctions exclusion, its war exclusion and the inception date, before or after February 24, 2022. Recovery after payment requires assigning the blocked roubles to the insurer, which inherits the same account.
Textbook case: a Dutch company owns a Russian subsidiary that declares a dividend of 900 million roubles in 2023. It is paid into a type C account. The company's political risk policy covers transfer restriction at 90 percent, waiting period 180 days, converted at the rate on the day the transfer was requested, 90 roubles to the euro. That gives 900,000,000 / 90 = 10,000,000 euros, and 10,000,000 x 90% = 9,000,000 euros of indemnity. In return, the insured assigns to the insurer its rights to the 900 million roubles, which stay in the account.
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