As (re)insurance is used as a weapon in the sanctions armoury against Russia, following its invasion of Ukraine European insurers look likely to be little impacted.

Underwriters and brokers have been steadily announcing they are withdrawing from Russian businesses and divesting their investments but it is likely the Russia-Ukraine war will affect the European insurance sector through second-order financial market volatility than through direct effects from sanctions on Russian entities or other measures restricting Russian business.

As we report this week, Fitch Ratings says European insurers and reinsurers have little direct Russian exposure in their insurance books and investment portfolios, and negligible Belarusian and Ukrainian exposure.

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

The firm added that several European composite insurers have small Russian subsidiaries or minority stakes in Russian insurers. However, we estimate that Russian insurance exposure accounts for less than 2% of the groups’ GWP, and that Russian investments account for less than 2% of their total investments.

The London market has already been told it needs to walk away from Russian space and aviation risks but while the wider market looks to have been able to weather the storm that the conflict has created there are growing fears for the future of the war markets.

The talk in the cafes of EC3 are that the war risks underwriters have been badly hit and the seizure of over 500 aircraft by Russia earlier this week will have done nothing to ease the concerns.

The hopes are that the peace negotiations that are underway will come to a positive resolution in days rather than weeks and the Putin administration grows increasingly frustrated with the lack of progress by his armed forces and are starting to target civilian facilities and are desperate to strike back at the countries which have offered military hardware and other aid to Ukraine.

Talk in London is of a seismic shift in the war market and its future shape once the conflict is at an end and the claims have been tallied.

Jon Guy, Editor

Emerging Risks

The London market has already been told it needs to walk away from Russian space and aviation risks but while the wider market looks to have been able to weather the storm that the conflict has created there are growing fears for the future of the war markets.

Follow us on twitter: @risksEmerging