London market grapples with 'unclear' Russian sanctions
Brokers and carriers scrambling to understand operational exposure to sanctions as Lloyd’s insists ‘market is well placed to adapt to the evolving landscape’
The London re/insurance market is grappling to understand the impact of sanctions on Russia, as the UK government announced specific insurance sanctions relating to the aviation and space sectors.
Brokers and carriers have been scrambling to unpick the flood of sanctions imposed by Western governments against Russia in recent days.
The operational implications for the re/insurance sector are enormously challenging, particularly where the sanctions affect ongoing issues such as a claim.
Global insurance programmes will also need to be picked apart for any Russia exposure, while companies will need to take extra care to identify any third-party involvement that could be in breach of sanctions.
Some businesses also have operations in Russia, raising questions about how staff are paid.
“Companies will need to take legal advice. It is not clear,” one senior broking executive told Insurance Day.
The London market is thought to have limited treaty reinsurance business from Russia. But some property direct and facultative covers are likely to have been placed in the London market, the broking source said.
“There is a lot to think through and the exposures [to sanctions] are not clear,” the source said.
Lawyers said the “devil will be in the detail” and it was vital for the market to follow new regulations closely.
Yesterday the UK government said it will bring in further sanctions targeted at the provision of re/insurance services for Russian companies, which will “severely limit” access to the global re/insurance market.
Russian companies in the aviation or space industry will be prevented from making use of UK-based insurance or reinsurance services directly or indirectly. This will impact the Lloyd’s and London markets.
Lloyd’s chief of markets, Patrick Tiernan, said the corporation is “working closely with the Lloyd’s market to uphold the implementation of sanctions applied by governments around the world”.
“The market is well placed to adapt to the evolving landscape, including the imposition of sanctions,” Tiernan said.
He added it was important for market participants to identify customers whose cover may be affected by sanctions and ensure they are kept informed of any changes.
Companies have also been scrambling to understand their loss exposures to the war in Ukraine, with lines such as terror and political violence, aviation hull and trade credit in the spotlight.
On March 2 Hiscox described its direct exposures to the Ukraine crisis as “limited”. Its executives told investors its terror and political violence portfolio is not expecting a significant loss, in large part thanks to its reliance on reinsurance.
The company has also seen some activity on its kidnap and ransom portfolio, as a result of evacuations, its group chief underwriting officer, Joanne Musselle, said. Muselle added a “tiny proportion” of the group’s premium would be subject to sanctions.
The marine sector has also been in the spotlight. Earlier this week Lloyd’s List reported protection and indemnity club West of England had axed cover for two of the five Russian-financed ships specifically singled out by the US because of links with Promsvyazbank-affiliated PSB Leasing.
International Group clubs are reviewing their obligations to Russian shipowners in light of the growing array of sanctions from multiple governments, Lloyd’s List said.
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