As Russia’s invasion of Ukraine enters day 20, President Vladimir Putin has signed a law prohibiting insurers in the country from completing transactions with insurers, reinsurers, and broker firms from what it calls “unfriendly states”.
The move from the Russian Parliament comes in response to a wave of economic sanctions imposed by western nations, including measures designed to prevent Russian businesses from accessing international re/insurance services.
Under the law, insurers in Russia are now banned from ceding risks to carriers from the UK, U.S., Japan, Switzerland, and all EU states until December 31st, 2022.
Additionally, the legislative amendment sees the Bank of Russia Board Directors assume the authority to determine the obligations that are not subject to transfer by a cedent to a national reinsurer for reinsurance protection.
The Bank of Russia Board of Directors will also have the right to determine the data that financial organisations have the right not to disclose to the public at large – which the Kremlin says will prevent “disclosure by financial organisations of any information that can be used by the unfriendly states to impose sanctions.”
According to the Kremlin, this Federal Law is “aimed at ensuring the financial stability of the Russian Federation due to hostile moves by foreign states and international organisations and introduces a special regulation of relations in the financial market and corporate relations”.
Russian President Vladimir Putin signed this Federal Law on the same day Swiss Re, one of the largest reinsurers in the world, announced it was the latest global carrier to cease new and renewal business in Russia amid the war in Ukraine.
The Switzerland-based company joined a growing list of re/insurers and brokers that have decided to cut ties with the country, including the world’s three largest brokers, Marsh McLennan, WTW, and Aon.
Hannover Re, one of Europe’s big four reinsurers, revealed last week that it had placed new and renewal business on hold in Russia, while Italian insurer Generali was one of the first to sever ties with the country.
As other organisations assess the situation in Ukraine, which shows no sign of improving anytime soon, it’s likely that more carriers from around the world will look to withdraw from Russia.
So, it could be a tricky time for insurers in the country as this law effectively narrows their options and greatly reduces the volume of available and diversified reinsurance capacity.
Furthermore, rating agencies have started to downgrade insurers and reinsurers in the country to reflect heightened geopolitical, economic and financial system risk.
In an effort to mitigate the impacts on the country’s risk transfer industry, in early March, the Bank of Russia did announce a significant increase in the capital for Russian National Reinsurance Co. from USD 600 million to USD 2.57 billion, which expands the volume of available capacity and enables domestic carriers to reinsure more risks within Russia.
