Insurers, reinsurers have little direct exposure to Ukraine, Russia

Global insurers and reinsurers generally have little direct business or investment exposure to Ukraine and Russia, according to a report Friday from Moody’s Investor Services Inc.

The insurance industry, however, could face secondary impacts of the conflict including greater financial market volatility and higher energy prices.

Insurance penetration in Ukraine and Russia is low, particularly among international insurers, and the Russian and Ukraine insurance markets are dominated by local insurers. Further, most insurance lines of business carry war exclusions in their contract language.

Some property/casualty and reinsurers could experience “moderate” losses from both market volatility and underwriting from a few specialty lines including political/sovereign risk insurance and trade credit insurance. “Public equities were hit particularly hard across the globe both on the run up to the invasion, and immediately following, although some indices have partially recovered,” Moody’s said.

Among the wider fallout from the conflict, higher energy and commodity prices could drive claims inflation for insurers. The conflict could also lead to further supply chain disruptions and higher property repair costs.

Exports from Ukraine and Russia that are used in property or vehicle repairs include lumber, petroleum products, iron, chemicals, platinum, aluminum and auto parts, Moody’s said.

There may also be a heightened risk for cyber insurers as the conflict raises the risk of worldwide cyberattacks against critical infrastructure assets, along with a possible further escalation and increased frequency of cyberattacks against private companies and other organizations.

Moody’s notes that while cyber insurance policies generally contain war exclusions, “language is inconsistent across the market and world, and how these exclusions would apply to affected parties outside Ukraine can be complex.”

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