Hannover Re and Munich Re are among reinsurers who have warned to cease underwriting any kind of risks related to the conflict in Ukraine from the start of next year, with other reinsurers thought to be taking a similar approach, suggests a recent Bloomberg report.
With reinsurers preparing to potentially cease cover, the bulk of the risk is set to be forced onto insurers, thus causing them to reduce what they offer, and in turn, pushing shipowners into a rush to try to find alternatives, or even operate with less cover.
Chris McGill, class underwriter for cargo at the insurance company Ascot Group, commented, “The major German reinsurers and others are looking to exclude losses emanating from or linked to Russia and Ukraine war.
“This is the first time we’ve ever had to contemplate a material change to our reinsurance program.”
Bloomberg’s report suggests that the potential pullback by reinsurers comes after many have seen hits to their results from the war.
Hannover Re said it set aside a reserve of 331 million euros ($351 million) in the first nine months of this year for possible losses tied to the conflict.
“We’ll have to reduce the limits we put up,” McGill added, “That will force rates to increase as you’ll get an automatic reduction in supply.”
Higher premiums and a lack of cover also threaten to complicate exports of key materials, potentially adding to supply chain issues and the ongoing global inflation pressures.
Bloomberg also cites Denis Shashkin, a P&I correspondent at the major Russian port of Novorossiysk, who suggested that if the large global reinsurers ultimately stop covering Russia and Ukraine marine business, shipowners might turn to insurance from Chinese or Turkish firms.
“In the short run, premiums could get higher, but in the long run, it’s unlikely to make a big difference,” he said.
“Shipowners may decide not to insure cargoes, but they need to get P&I insurance in order to have their vessels hired by charterers.”
The upcoming renewals are already burgeoning with complexity, now, given the implications that may arise from this news, January is set to grow even more arduous.
Clyde & Co’s Eva-Maria Barbosa recently suggested there is likely to be a sharp reduction in available nat cat reinsurance capacity at upcoming renewals following a climate change-induced increase in the frequency and severity of European nat cat events.
The main takeaway from this report was that reinsurance renewal contract signings for January 1 are running “very late,” with only about 5% of the treaty market having reportedly cleared so far, versus the typical 60% for this point.
