Aon and Marsh McLennan, global re/insurance brokers, called the (re)insurance industry to use its capital, expertise, and historical role to support Ukraine’s economic recovery and growth. They stressed that removing blanket exclusions, which fail to account for varying risks across the country, would boost Ukraine’s economy.
Far from Russia’s war in Ukraine, stores are running out of cooking oil, people are paying more at the gas pump, farmers are scrambling to buy fertilizer and nations are rethinking alliances.
Russia’s invasion of Ukraine has triggered seismic repercussions: a fast-moving refugee crisis, unprecedented sanctions against a major economy and a shakeup of global relationships, including a reinvigorated NATO.
Global reinsurers bundled risks from Ukraine, Russia, Belarus
Since the war began, global reinsurers have bundled risks from Ukraine, Russia, and Belarus, excluding them from reinsurance contracts. This has reduced available capital and hindered economic stability (see why War in Ukraine Slows Growth of Global Re/Insurance Market).
Grouping Ukraine with Russia and Belarus doesn’t reflect data-driven risk assessments. Ukraine, despite being under attack, continues to pursue its path as a democratic economy and future EU member.
Marsh McLennan supporting of Ukraine – helping it attract global investment to rebuild the country, and recover from the devastating impact of war on its people and economy
John Doyle, president and CEO of Marsh McLennan
“We call on the global insurance community to join us in this effort and end blanket exclusions for Ukraine.”
Global re/insurers and brokers support the economy of Ukraine
Marsh McLennan and Aon each are already working with the Ukraine, U.S. and UK governments, along with many other international organizations, to support Ukraine’s economy as it endures ongoing attacks and accelerate investment in the country’s eventual economic recovery.
Aon’s support of Ukraine leads us to look forward to its economic recovery. Insurance capital is essential for the reconstruction of Ukraine’s health care, energy and agricultural sectors.
We’re asking the insurance industry to look closely at Ukraine’s risks and work to strengthen the public-private partnerships under development
Greg Case, CEO of Aon
In March, Marsh McLennan expanded its public-private partnership with the Ukrainian government to cover all shipping to and from Ukraine’s ports. This builds on the company’s previous efforts to assist Ukraine in developing its war risk data platform.
The platform offers investors and (re)insurers detailed, transparent data on the conflict’s impact and the level of war risk.
War risk insurance for grain shipments and other critical food supplies globally
Launched in November 2023 to provide affordable war risk insurance for grain shipments and other critical food supplies globally, Unity offers hull and separate protection & indemnity (P&I) war risk insurance at significantly reduced premiums compared to standard market pricing.
In addition to grain, Unity now provides cover for Ukraine’s other leading export industries including iron ore, steel, electrical equipment, and animal fodder.
Standby letters of credit created by the state-owned Ukrainian banks Ukreximbank and Ukrgasbank, each confirmed by DZ Bank, will continue to provide a first loss compensation fund to shipowners and charterers which is supported by the Government of Ukraine.
Underwritten by insurers based at Lloyd’s and other London-based insurers, and led by Ascot, Unity provides up to $50 mn in hull and P&I war risk insurance. Unity is available to clients of all Lloyd’s registered brokers, to provide added support to ongoing humanitarian efforts and alleviate continued pressure on supply chains and global food security.
In June, Aon collaborated with the U.S. International Development Finance Corporation to create a unique insurance program supporting war risk policies for businesses in Ukraine. Access to war risk insurance, particularly in health care and agriculture, will drive economic growth, create jobs, and lay a stronger foundation for Ukraine’s reconstruction efforts.
The firms assert that arbitrary exclusions for Ukraine contribute to confusion about the vastly different levels of risk in the country.
As a result, there are potential issues with how (re)insurers underwrite risks between regions directly impacted by the war and many areas of central and western Ukraine which have suffered little to no war damage.
Re/Insurance broker WTW has unveiled a new facility in partnership with Ukrainian insurance companies VUSO, designed to insurance cover cargo and land warfare risks in Ukraine.
The initiative represents an advancement in risk management solutions, as WTW addresses critical insurance coverage gaps for businesses transporting goods across Ukraine.
Led by Lloyd’s syndicate Markel, the London Market-supported facility is now operational. Enterprises can access comprehensive cargo and war-on-land coverage through VUSO or WTW Ukraine, ensuring seamless service.
The partnership between WTW and VUSO highlights their commitment to innovative, customized solutions in a changing risk environment.
By utilizing the expertise of London’s insurance market, this facility aims to mitigate risks related to cargo transport and land warfare in Ukraine.
In response to ongoing uncertainties, the launch of this facility demonstrates a proactive approach to meeting the specific needs of businesses operating in Ukraine.
The use of data and analytics can enable more impactful insights into where insurance capital can contribute to Ukraine’s reconstruction and further economic growth.
How to Russia’s War in Ukraine is changing the World and Insurance?
The War in Ukraine has demonstrated the devastating toll that a systemic event can have on the global risk landscape. As quickly as the conflict began, our economic assumptions have been challenged; our energy mixes thrown into question; and our geopolitical relationships redefined.
The knock-on effects of the crisis will last a lifetime, and it is clear the damage already caused has left the world in a dramatically altered state. Business and insurers must work to understand and navigate the world it leaves behind.
The latest Lloyd’s report, Ukraine: A conflict that changed the world, created in partnership with Aon, aims to provide insights on the medium to long term impacts of the Ukraine crisis on the risk landscape.
The analysis is based on in-depth interviews with 75 sector experts and practitioners across Aon and Lloyd’s, each providing real-life, practical insights on the challenges that companies are facing today and how they are adjusting their risk management approaches in response.
Why Greater War risk insurance is so important for Ukraine?
Since Russia invaded Ukraine in February 2022, it has become impossible to get insurance coverage for war-related risks in Ukraine. Yet, a healthy private insurance market is crucial for Ukraine’s sustainable economic recovery.
The international guarantee scheme for war-risks insurance is needed. It should be governed by a special vehicle with robust corporate governance, funded by international donors, and implemented with a consortium of global reinsurance companies to ensure investor confidence.
Enabling Ukraine’s recovery and reconstruction will require ambition and innovation from industry and governments alike. Despite the ongoing war in Ukraine, attention is turning to how to rebuild the country – learning from historical precedents that warn of the risk of winning the war, only to lose the peace that follows.
According to Marsh McLennan, estimates suggest over $1trn of investment will be required, much of it expected to come from the private sector.
Yet this massive investment will not be feasible if investors cannot adequately protect themselves from war risk (see Insured Losses for Ukraine War).
(Re)Insured losses for Ukraine War
The war in Ukraine has brought devastating humanitarian consequences first and foremost, but also unexpected losses and economic shocks. The Ukraine war and covid-19 demonstrate the vast loss potential from systemic perils, according to Howden Report.
The full extent of insurance and reinsurance losses stemming from the war between Russia and Ukraine remains a murky subject with many unknown factors, but analysts at Fitch Ratings are confident that the war will prove to be a “contained risk” for the market.
The convergence of geopolitical and macroeconomic shocks – war in Ukraine, fractured energy markets, 40-year high inflation, interest rate hikes, depleted capital – as well as the second most expensive natural disaster ever (Hurricane Ian), has introduced significant volatility into the market.
The crisis early last year impaired already stressed supply chains, before shipping costs and overall pressures subsequently subsided through the course of the year.
Both the war and COVID underscore the need for companies to secure supply chains and reduce reliance on geopolitical hotspots.
Pricing cycles in the commercial insurance and reinsurance sectors are now converging, marked by price increase moderation overall for the former, albeit with strengthening in challenged areas, and rapid acceleration (dislocation even) for the latter.
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AUTHOR: Oleg Parashchak – CEO Finance Media and Beinsure Media
