Atlas Magazine May 2022

Russia-Ukraine war, one big loser, the Lloyd’s of London

Weakened by a pandemic that lasted more than two years, insurers are once again faced with a catastrophic risk. The Russia-Ukraine war is a second full- scale crash test for a profession exposed, in the truest sense of the word, to all the evils of the world.
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After two months of hostilities, insurers are withstanding the shock. The armed conflict does not seem to have compromised the solidity of the system. Of course, the effects of the war may vary from one insurer to another, but for the major insurance and reinsurance companies, the impact remains weak.

Unlike the Covid-19 pandemic, which mainly affected the life and health insurance, business interruption and cancellation risks classes of business, the war in Ukraine has a particular impact on the transport class of business.

Aviation risk professionals could, therefore, be compelled to pay between 6 and 15 billion USD to compensate the American and European renters of the 500 planes grounded on Russian tarmacs. The amount of the bill would make this event the biggest aviation loss of all time. The magnitude of the potential damage will inevitably influence the renewal of air fleets whose war risk rates could reach unprecedented heights.

As for the marine hull and cargo insurance, it could account for losses in the range of 3 to 6 billion USD. Likewise aviation, insurers will have to increase war risk rates for all ships sailing in conflict zones.

Another segment of the market affected by the events pertains to the other property damages including energy whose losses would be in the range of 5 to 7 billion USD.

Excluding credit and cyber risk insurance which, depending on the duration of the conflict, could increase the bill, insurers and reinsurers will survive the Russia-Ukraine conflict without any major damage.

For the time being, there is only one big loser in this war, Lloyd's of London which traditionally accounts for a large part of the transport, aviation, credit and political risk covers.

Atlas Magazine N°191 May 2022

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