Ukraine war will present major insurance claims, warns Lloyd’s of London | Lloyd’s

War in Ukraine will present a “major claim” for the insurance market this year, Lloyd’s of London has warned, adding that it was working with governments and regulators to implement complex sanctions on Russia.

Announcing a swing back to an annual profit as it recovers from the pandemic, the insurer said aviation, marine, trade credit and political risk lines of business would be most affected by Vladimir Putin’s invasion.

The firm did not quantify the impact, but said it was “in close dialogue with market partners to understand exposures”. Some of those losses are likely to include unrecoverable aircraft, after Moscow passed laws to impound $ 10bn (£ 7.6bn) of jets leased to Aeroflot and other Russian airlines by western organizations.

John Neal, the insurance market’s chief executive, said: “As we announce these results today, our thoughts are first and foremost with the people of Ukraine. In a world buffeted by increasingly complex and connected risks – from the pandemic to a geopolitical conflict – the Lloyd’s market is standing by its customers and supporting their recovery when things go wrong. ”

The company added: “We are currently living through a period of heightened risk, not seen or experienced for 75 years. Insurance has a critical role to play. ”

However, business underwritten by the Lloyd’s market in Ukraine, Russia and Belarus represents less than 1% of the global total, and it stressed: “Direct and indirect claims are expected to fall within manageable tolerances and will not create solvency challenges.”

As part of sanctions on Moscow following its invasion of Ukraine, Russia’s aerospace and aviation sectors were blocked from accessing insurance through the UK insurance market in early March. This prevents UK-based insurance or reinsurance firms from offering contracts linked to Russia.

The sanctions targeted two industries in which London, and Lloyd’s in particular, are considered global leaders, while shipping – Lloyd’s is also a leader in maritime insurance – was not included.

However, many businesses have moved away from exposure to Russian entities, while war risk premiums hit $ 300,000 for some tankers operating in the Black Sea, the journal Lloyd’s List reported. The number of ships leaving Russian ports is down 35% since the start of the invasion a month ago.

Lloyd’s reported a profit before tax of £ 2.3bn for 2021, compared with a loss of £ 900m the year before, when it was hit by pandemic-related claims, such as for business interruption and event cancellations. Higher premiums and reduced losses from the Covid-19 pandemic outweighed costly claims for natural catastrophes. Lloyd’s also managed to increase premium rates by nearly 11%.

The group paid £ 19.9bn of gross claims, including £ 2.9bn to customers impacted by the pandemic, the vast majority (86%) of claims it has received.

Leave a Comment