The specialist Lloyd’s insurance and reinsurance marketplace has said it believes the ongoing conflict in Ukraine will be a major claim for the market in 2022.
In comments alongside the release of its yearly results today, Lloyd’s said that it continues to be in “close dialogue” with market partners to understand its exposures to the war.
The 2021 results represented the best figures reported by Lloyd’s for some time, with an overall profit of £2.3 billion and a combined ratio of 93.5%, against a backdrop of heightened catastrophe activity.
The marketplace also assured that its business written in Ukraine, Russia and Belarus currently accounts for less than 1% of Lloyd’s global footprint.
It added that it will continue to work “in lockstep” with governments and regulators around the world to support and implement a complex series of sanctions on the Russian State.
Lloyd’s has previously been vocal in its support for sanctions introduced by the UK government, which have aimed to isolate Russia from the global financial system, including by restricting the ability of Russian firms to access insurance and reinsurance internationally.
“At the time of writing, we are shocked and saddened by events in Ukraine, which dominate both our news coverage and our discussions across the Lloyd’s market,” said Lloyd’s CEO John Neal. “Though we’re yet to see and understand the full extent of the economic and human cost, it is clear the impacts will extend from Ukraine to all corners of the world.
“Our thoughts, sympathy, and support are with the people of Ukraine. We salute your courage in the face of unimaginable danger, and it has reminded us what true bravery looks like. We will continue working with the Lloyd’s market, colleagues, governments, regulators and others to help bring a swift and peaceful resolution to the conflict, while providing support to those affected.”
At present, a priority issue for insurers are the 500+ stranded Western planes that Russia has moved to nationalise, which analysts believe could constitute a historic loss for the aviation market, with London Market insurers by far the most exposed to this risk.
But other commentators have warned that the war will also impact European insurers and reinsurers through second-order financial market volatility, instead of through direct effects from sanctions on Russian entities and other measures that are restricting Russian businesses.
“The situation has once again highlighted how connected our world is. After the global shock of the pandemic, we’re now watching a regional conflict trigger global market volatility in the short-term, and political, economic and environmental instability in the medium-term. Global challenges such as these require global responses,” Neal continued.
“Governments around the world responded to COVID-19 by injecting trillions of dollars into the economy, while businesses moved to help their customers manage the disruption. On climate change, we have now built a consensus, hard-fought by activists and early adopters, that significant investment is needed by both governments and businesses to finance a transition great enough to shift the dial on global warming. Ukraine enters that fray, promising to alter the political tectonic plates and respective relationships of the world’s superpowers and alliances.”
Lloyd’s Chairman Bruce Carnegie-Brown also commented: “Our thoughts continue to be with the people of Ukraine as they respond to the damage and disruption caused by Russia’s invasion into their lands. We’ve been working to help governments, regulators and businesses in the UK and around the world implement the sanctions we hope can speed the end of this conflict, and we will continue to deploy our market’s expertise, relationships and resources behind that goal.”
“Both COVID-19 and the conflict in Ukraine remind us how the risk landscape has changed,” Carnegie-Brown went on. “One began as a health risk, the other as a political hazard; yet both have evolved into global crises with far-reaching economic, environmental, and humanitarian consequences. The message is clear: no longer can we view our interests and risks in isolation to others; we must see them as an interwoven web of interests, dependencies, and impacts. This idea underpins our market’s work to help society manage and mitigate risk and is the driving principle behind our purpose.”
Rating agency AM Best is expecting Western re/insurers to face significant exposure to the Russia-Ukraine crisis while analysts at KBRA have warned of “pain” for insurers and DBRS says the invasion will weigh on the outlook of the P&C sector.
So far, a number of major insurance and reinsurance companies have already made the decision to withdraw their business from Russia following its invasion of Ukraine, including broking giants Marsh McLennan, Aon and WTW.