Ukraine Invasion Seen Having Significant Insurance Industry Impact

A grey-scale map of Europe with Ukraine colored in with its flag's colors (yellow and blue) and red arrows pointing toward Ukraine from Belarus, Russia, and Crimea

March 03, 2022

A grey-scale map of Europe with Ukraine colored in with its flag's colors (yellow and blue) and red arrows pointing toward Ukraine from Belarus, Russia, and Crimea

Russia's invasion of Ukraine will likely have a substantial impact on the global insurance industry in the near to middle terms, particularly given the fallout in the capital markets and the potential for widespread cyber attacks, according to A.M. Best.

In a Best's Commentary, "Significant Implications of Ukraine Invasion on Global Insurance Industry," the rating agency notes that the invasion has had an immediate negative impact on worldwide stock markets and that continued volatility seems likely, challenging efforts by central banks, including the US Federal Reserve, to contain inflation.

In addition, sanctions against Russia could have significant knock-on effects on oil and commodity prices, tourism, and the economies of less resilient countries, Best said.

"Further sanctions may impact the ability of international insurers and reinsurers to underwrite Russian risks or make it more difficult for them to service claims on existing policies," Anna Sheremeteva, financial analyst at A.M. Best, said in a statement. "Most affected would be those writing large energy and infrastructure risks, such as London market insurers, and international reinsurers."

"Sanctions also will affect the balance sheets of Russian insurers and their relationships with international partners," Todor Kitin, financial analyst at A.M. Best, said in the statement. "The valuation of investments would be affected by a prolonged equity market downturn, any increase in the Russian central bank's policy rate, or a widening of credit spreads. On the other side of the balance sheet, higher-than-anticipated inflation would impact claims costs, with potential implications for the adequacy of reserves."

An escalating global conflict could also increase the risk of a systemic cyber attack and cause substantial economic and insured losses, Best said. A heightened perception of cyber risks could increase prices in the already hardening cyber-insurance market.

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March 03, 2022