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ID Comment: A week of war

Russia’s invasion of Ukraine continues to bear bitter economic fruit

A week on from the Russian invasion of Ukraine and the situation remains something of a curate’s egg for all sides.

On the one hand, Russian forces have penetrated deep into parts of Ukraine and have occupied the city of Kherson. On the other, their movement appears to have stalled amid reports of poor logistics and fierce Ukrainian resistance.

It is outside the remit of Insurance Day to speculate on what might happen from this point on and it is worth pointing out a week is a short time in war.

However, we can look at the impact the invasion has had so far on the broader re/insurance picture and the economic landscape beyond that.

The UK government has said it will cut off Russian access to the UK’s re/insurance market, a move that will severely limit a wide range of Russian insurers, especially in the aviation and space markets.

Aviation insurers are already looking at the impact of having Ukrainian airspace closed to overflights, as well as the increasing numbers of countries that are now banning Russian flights from overflying their territory.

And the shipping industry has seen a positively rapid retreat on the part of charterers and owners from any kind of Russian business. Insurance rates are said to be skyrocketing in this area – when coverage can even be obtained.

The news at least two neutral ships have been attacked by the Russians, one of which is reported to have sunk, will not help matters.

The international shipping industry is one of the major arteries of global trade. Lack of access to it severely limits trading options. Russia’s trade will be severely affected if this continues, leading to economic implications to its wider economy.

Then there are the international sanctions that have been brought in, as well as the sanctions that are being announced. These have already had an economic impact on Russia, with its main stock exchange being closed after it plunged and the value of the rouble against the US dollar effectively collapsing. Russian billionaires are selling off their football clubs as sanctions bite them.

The impact of all of this on the Russian re/insurance market can only be imagined at present. The market is not a large one and its re-emergence (or perhaps rebirth) after 70 years of communism has seen it grow in fits and starts. To be suddenly cut off from London and the wider world must be resulting in frantic meetings and desperate planning.

But we also need to assess the other damage, the more personal. Ukrainian cities are being shelled and bombarded. Ukrainian homes are being destroyed, business are burning, lives are being ruined. The cost, in both lives and property, is very real now and is climbing remorselessly.

As we watch and wait to see how matters play out we can only hope that the great and growing list of damage eventually forces the Russian government to realise there are times when the cost of violence outweighs any perceived benefits – and there are times when you have to admit to having miscalculated.

Buildings can be rebuilt. Human beings cannot.

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