The aggregate value of planes stuck on Russian territory following the nation’s invasion of Ukraine could even surpass the claims stemming from 9/11.
Insurers continue to assess exposure and liabilities to Ukraine, Russia and surrounding areas. Combined impact of the Ukraine crisis and developing airline assets held in Russia may have a far-reaching impact on this class.
Following the Russian invasion of Ukraine, It is understood that more than 500 planes were left stranded in Russia after the country began to invade Ukraine earlier this year. A law passed by the Duma in March allows for the state to effectively nationalise the aircraft to ‘ensure the stable functioning of the national transport system’ by allowing the vehicles to be certified and registered within the country.
At the time, Berenberg said that the situation was the greatest risk to the London insurance market, given that the planes are valued at over $10bn. It was a view reflected at the same time by Bank of America.
Meanwhile, around the rest of the market, WTW said that hard market conditions are prevailing for banks and aircraft lessors, but rate increases were starting to plateau.
WTW said that while the impact of the invasion was still unknown on the aviation industry, it said that there was ‘little hope of recovery’ for the billions of dollars in aviation assets that remain in Russia. In a more-general overview, WTW said that rate increases continue to decelerate with more capacity entering the marketplace alongside some new insurers trying to obtain a portion of the inflated premium base.
Underwriters are expected to make money in 2021 despite a slight softening in the market toward the end of the year. Worldwide claims were not significant, despite a large hail loss for several domestic airlines, which did not turn out as bad as first forecast.
WTW
Rates and premium saw downward pressure as capacity expanded slightly due to increased appetite from underwriters, who focused on maintaining their premium base rather than applying rate increases. We expect some buyers will see modest decreases in 2022.
Overall market capacity remains adequate, particularly for profitable insured with a growing fleet.
Ship insurers said they are cancelling war risk cover across Russia, Ukraine and Belarus, following an exit from the region by reinsurers in the face of steep losses.
Reinsurers, who insure the insurers, typically renew their 12-month contracts with insurance clients on Jan. 1, giving them the first opportunity to scale back exposure since the war in Ukraine started, after being hit this year by losses related to the conflict and from Hurricane Ian in Florida.
P&I (protection and indemnity) clubs American, North, UK and West are no longer able to offer war risk cover for some liabilities in the region from Jan. 1, they said in recent notices on their websites. The clubs are among the biggest P&I insurers who cover around 90% of the world’s ocean-going ships.
UK P&I Club said on Dec. 23 that the issue had arisen because of a lack of availability of reinsurance for reinsurers, also known as retrocession.
“The Club’s reinsurers are no longer able to secure reinsurance for war risk exposure to Russian, Ukrainian or Belarus territorial risks,” it said.
American P&I said on Dec. 23 that it had received a “notice of cancellation” for the region from its war risk reinsurers and was cancelling its own insurance as a result.
Ships typically have P&I insurance, which covers third-party liability claims including environmental damage and injury. Separate hull and machinery policies cover vessels against physical damage.
by Yana Keller
