Insurers up against Russia-Ukraine war

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The current situation is so serious that it is causing the market to take a second look at its contractual documents. Taken aback by the Covid-19 pandemic, insurers were slow to notice that certain clauses in their contracts were poorly drafted, with wording that was sometimes ambiguous. Big names in the industry such as AXA, Allianz, Generali and Lloyd's have paid dearly for these inadequacies in court.

More complex to manage than the pandemic, the Russia-Ukraine war quickly degenerated into an economic and financial war, opposing two camps with totally different visions.

For the time being, rating agencies evaluate the insurers' losses in a range of 20 to 35 billion USD. This amount remains much lower than that of Hurricane Katrina of 2005 which had cost the profession 61 billion USD. Confined to a classic foreign war, the current conflict will therefore not affect the financial soundness of the market.

On the other hand, the transformation of the conflict into a "cyber war" that could destroy critical infrastructures and block the global activity would generate considerable and uninsurable operating losses. A real disaster scenario, feared by insurers.

The London market, which concentrates 80% of political coverage, has already published standard models of war risk exclusion clauses, while other insurers are calling for the pure and simple exclusion of all cyber risks from policies.

One thing is certain, cyber warfare will be the next scourge the planet has to fight.

Atlas Magazine N°190 April 2022 [1]