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How exposed are insurers for Ukrainian-Russian war losses?

13:22, 24 March 2022

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A bombed-out Ukrainian apartment block
Russia’s invasion of Ukraine carries massive human and financial cost – Photo: Shutterstock

What do insurance T&Cs make of bombed-out Ukrainian apartment blocks and smouldering hospitals? The damage to Ukraine’s infrastructure will take decades to rebuild.

The insurance risk divides between vanilla insurance players and the reinsurers that manage the former’s risk.

Some insurance stocks are riding the anxiety out so far with indifference, even confidence. Over the last 30 days Aviva (AV) is up more than 6%, AXA (CSp) is nearly 5% higher and Hiscox (HSX) has surged 7%.

Prudential (PRU) told “We’re an Asia-Africa business and we have no business there [Ukraine]. In terms of any other exposure it’s tiny.”

Reinsurers on the front line

It’s a different picture for specialist reinsurers like FTSE-250 constituent Beazley plc (BEZ), down more than 7% in the last month. 

European insurers and reinsurers have little direct Russian exposure on their insurance books and investment portfolios – negligible Belarusian and Ukrainian exposure, according to Fitch Ratings.

“However, volatility in global financial markets caused by the conflict could affect their capital ratios,” Fitch explains. “Moreover, the conflict raises the prospect of even higher inflation, which could lead to pressure on profitability, particularly for non-life insurance.”

Scope and scale

This morning, marketplace insurer Lloyds of London revealed £2.3bn ($1.7bn) in full-year profits against a 2020 £0.9bn loss, plus a strengthened combined ratio – a key profitability insurance metric – of 93.5%.

But Lloyds warned Ukraine “will be a major claim to the market in 2022 and is in close dialogue with market partners to understand exposures”.

Business underwritten by the Lloyd’s market in Ukraine, Russia and Belarus represents less than 1% of its global footprint, Lloyds says. 

Direct and indirect claims are expected to fall “within manageable tolerances and will not create solvency challenges” it adds.

Understand the market

  • Many insurance companies have separate units to manage specialty lines
  • Typically these include trade credit insurance (TCI) risk and political risk insurance (PRI)
  • PRI pricing on largely incalculable geopolitical risk is difficult.

Analyst Henry Heathfield at Morningstar says most insurers are playing down the impact of the Ukrainian-Russian conflict but singles out Allianz currently as an insurer to swerve. 

Heathfield cites risks with aviation and business interruption, amongst other issues.

“For those who want European insurance exposure and to position themselves as defensively as possible against this war we recommend Swiss Life, which carries a 4.55% dividend yield,” Heathfield wrote in a briefing note earlier this month.

Risk prediction has few spreadsheet answers 

One problem with the Ukrainian conflict is that, despite devastating consequences, it’s hard to predict insurance claims – or future sales – despite plenty of pre-war warning on risk.

Getting data on isolated war-related events in the field is tough: the final bill for the war could take decades, allowing insurers to absorb costs steadily, rather than in one-off hits. 

Forbes McKenzie, CEO of Mckenzie Intelligence Services, told that “the current challenges the market is facing are the paucity of information, uncertainty around what insurance programmes to apply as well as stranded assets”.


For the most part, Eastern European risk exposure looks slight. One insurance insider said most risk businesses were highly diversified – basic risk management. So claims would likely work against earnings rather than ratings, or their capital position. 

“Most European insurers and reinsurers have strong capital relative to their ratings,” Fitch Ratings says, “but a sustained downturn in financial markets would erode their capital headroom and could put pressure on some ratings.”

War can also exacerbate high inflation, as proving highly worrying for almost all economies currently.

The Association of British Insurers has advised against heightened Russian cyber-attack risk “and all UK organisations need to review and reassess their exposure to, and resilience against, a cyber breach”.

Advance Crimean warning

  • International involvement in the Russian insurance market has been limited since Russia’s invasion of the Crimean Peninsula in 2014
  • Fitch Ratings says this led to global reinsurers withdrawing much of their coverage
  • “We estimate that global reinsurers’ coverage of risks in Russia typically accounts for less than 2% of their gross written premiums (GWP),” Fitch Ratings says. 

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