Insurers Exit Political Risk Cover for Russia and Ukraine

Concerns over the political unrest and country credit ratings in Ukraine and potential sanctions against Russia have persuaded some insurers to effectively stop underwriting political risk insurance in both countries, reports Marsh.

However, the insurance broking and risk advisory group added that the recent tensions are unlikely to cause a large-scale impact to political risk, structured credit, and trade credit insurers. In recent years, several insurers and reinsurers have expanded into those coverage lines, increasing capacity and putting downward pressure on rates. Insurers’ exposure in Ukraine is still relatively modest though.

“The current situation in Russia and Ukraine is extremely fluid,” said Evan Freely, global leader of Marsh’s credit and political risk practice.

“Companies with interests in the region face the potential for damage to assets through political violence and possible broader expropriation measures or sanctions against foreign interests in Russia should sanctions be imposed against the country. This is in addition to the potential for payment delays on trade payment obligations due from customers, especially those in Ukraine.”

Existing policyholders with exposure in the two countries could experience premium rate increases upon policy renewals. In a brief issued by Marsh the group noted that “because Russia is the political risk and structured credit market’s largest country exposure, if the current conflict results in large-scale insurable damage, global premiums and insurance capacity for those coverages could be adversely affected.

“In the meantime, companies seeking to conduct new business in Russia and Ukraine will encounter difficulties obtaining coverage. No new political risk or trade coverage is being written in Ukraine. Some insurers are willing to underwrite Russian deals and may honour non-binding quotes on new business. However, if a political risk insurance policy is quoted, it is likely that organisations will experience delays before binding due to increased underwriting scrutiny.”

Because of the ongoing nature of the crisis in Ukraine and Russia Marsh advised companies “to review all insurance policies and clearly understand their limits and sub-limits, deductibles, loss-reporting requirements, covered perils, and other restrictions.

“For trade credit insurance specifically, organisations should maintain an open dialogue with their insurer regarding their customers’ ability to pay as well as the insurer’s underwriting strategy.”

4 views

Related reading

hanjin-shipping
donald-trump
job
New consumer banking head for Citi Asia Pacific