The unabated war in Ukraine since Russia’s invasion in February hasn’t just left the country battered but various industries as well. The insurance industry too is feeling the impact. It is estimated for instance that the war could cost insurers billions of dollars in claims. The risks too are only set to grow as western sanctions on Russia get more stringent.
The ripple effect
The global insurance industry has reported nearly $1.3 billion in losses and reserve charges related to the war in the first quarter, according to an S&P Global Market Intelligence analysis. Insurers in Europe especially were hit hard, with some saying that the losses may impact future earnings.
Insurer Swiss Re for instance is reported to have sustained the largest war-related impact among European insurers with a $283 million reserve hit for potential claims. US insurers too are feeling the hit — American International Group Inc reported one of the largest first-quarter losses among the group at $85 million.
For the longer term, the industry is bracing for a far heavier impact. This article on Mondaq estimates losses of nearly $20 billion for the insurance and reinsurance markets, while S&P Global paints an even bleaker picture with losses predicted at up to $35 billion.
But still, some insurers feel the impact may be limited
Since the largest Russia and Ukraine exposure for a global insurer represents less than 3% of revenue and 5% of assets, most US insurers’ total direct investments in Russia were below USD 1.5 billion as of end-2021 (negligible when you consider the fact that the industry’s total invested assets cross USD 7.5 trillion).
In a recent interview, Thomas Sepp, Chief Claims Officer of Allianz Global Corporate & Specialty (AGCS), said that though their legal team is on “high alert”, the insurance major does not expect a major wave of claims like those caused by the Covid pandemic as exposure as a corporate insurance carrier is limited. The reasons for this he states are: War exclusion clauses in almost all policies that exclude property and business interruption losses resulting from acts of war, where the company has “explicitly underwritten war risk covers, such as in aviation or marine”.
What about Indian insurers? And Indian corporates?
Indian insurers may remain insulated to a large extent from the invasion for reasons similar to what Sepp mentions — limited exposure in the two countries and the fact that “war as a risk” is an exclusion from most general insurance covers.
Uncertainties around marine insurance have also had an impact on Indian corporates with exposure of exports in this region, primarily due to war as well as Strikes, Riots, Civil Commotion (SRCC) risks not being covered by insurers in this region. This is leading many businesses to consider Free On Board (FOB) marine insurance options, where the seller’s responsibility ends once the merchandise is safely loaded onto the shipping vessel. While this is generally considered a cost-effective option that gives buyers greater control, given the risks currently associated with the region, the risk to be taken on by Indian importers has increased significantly.
So where do you go from here?
World-over, the ripple effects of the Russia-Ukraine war on insurance claims is still being analysed for a better understanding of the scope and scale of its impact.
With so much uncertainty in the air and considering the situation is still evolving, deciding on the insurance providers, plans and amounts that will meet your specific needs has become more complex than ever. That’s where working with an experienced insurance partner can take a lot off your plate.
For instance, at Odin, we partner with most major insurance providers, and are well placed to guide you on which types of insurance from which insurers would best fit your specific needs. Similarly, with our in-depth experience across industries, especially relating to trade, import/export and marine related requirements, we have our finger on the pulse of the evolving needs of each industry across geographies.
Do reach out to us if you are looking for customised solutions to your insurance needs.