British insurers being profoundly impacted by Western sanctions on Russia has been the message given to UK MPs.
On Monday, the Commons Treasury Committee sat with insurers and other financial economic experts to hear about the impact of sanctions on London’s insurance sector.
According to reports, Neil Roberts, head of marine and aviation cover at Lloyd’s Market Association, said that the impact had been ‘profound’.
He added: “The volume of the legislation that’s been coming out has been very difficult for people to manage. Even very well-resourced compliance teams have been finding it troublesome, and insurers are not as well-resourced as banks, and they’re also finding it difficult.”
Robert said that the current sanctions had not only left the industry confused, but that potential claims for lease aircraft could now run into billions.
Last month, Reinsurance News reported that the losses to the industry for planes stranded—and now effectively nationalised—in Russia are likely to reach $2bn, according to RBC Capital Markets. That news came days after Gallagher Re said that the conflict between Russia and Ukraine was to create renewed uncertainty in the aviation sector.
Reports suggest some 400 Western planes are still in Russia, with some commentators suggesting a possible loss of $10 billion if they cannot be repossessed.
The Kremlin has said that all Western planes still in Russia following the termination of leasing contracts in March will remain in the country indefinitely, while the country has plans to nationalise Western-made planes grounded within its borders. If this move goes ahead, analysts feel it could be an historic loss for the re/insurance industry.
Commenting on the implications for the insurance industry, Gallagher said at the time that in such a rapidly developing situation, it’s not possible to predict how things will play out.
“Regardless, 2022 renewals look set to present another complex engagement,” said the broker.
Away from aviation, Russia’s invasion of Ukraine is likely to drove more exclusions within the reinsurance sector, also reported here last month.
As we wrote then, the conflict is driving more exclusions into re/insurance, with Munich Re reportedly planning new wordings within its cyber insurance policies to exclude war, to avoid disputes over what is covered, according to Reuters.
The war in Ukraine has raised fears of cyber attacks, with the risk that Western businesses or government institutions could be targeted.
Most cyber policies cover companies against business interruption losses and the repair of hacked networks following a cyber attack, but exclude war. However, grey areas in the wordings leave insurers open to claims as a result of cyber war.
