Insurers may refuse to cover planes flying to Ukraine or ships sailing through the Black Sea as reinsurers, who insure the insurers, propose excluding the region from policies from next month.
According to Reuters, reinsurers typically renew their 12-month contracts with insurance clients on Jan. 1, meaning they have 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.
A proposed contract clause being circulated by reinsurers excludes war-related claims for planes or ships in Ukraine, Belarus and Russia.
Without the backing of the reinsurers, insurers themselves may be unwilling to provide cover for the region.
Reinsurers are particularly concerned about the loss of planes owned by aircraft leasing companies that are stuck in Russia and have already generated $8 billion in legal claims.
As they operate on an “aggregation” basis with marine and aviation war risk insurance, totting up the losses as one, claims in one area make reinsurers wary about the whole war risk sector.
While major reinsurers Hannover Re, Munich Re and Swiss Re declined to comment, insurer Ascot said the issue extends to the whole sector.
Around 90% of the war risk market for marine and aviation is insured in Lloyd’s of London and the wider London commercial insurance market.
Negotiations between insurers and reinsurers over next year’s contracts and the exact wording of the clause are ongoing, insurers fear the worst.
Aviation reinsurers are already reeling from claims related to two Boeing 737 MAX crashes in 2018 and 2019, while more than 400 leased planes worth around $10 billion have been unable to leave Russia after Western sanctions forced the termination of their leases.
Aviation insurers are reducing the amount of insurance cover offered for issues such as confiscation of planes, even before reinsurers have a say.
Reinsurers are also wary of other war risks, the original sources added, including claims for ships stuck in Ukrainian ports, triggered after 12 months, and a Chinese attack on Taiwan.