(Reuters) – American International Group Inc., one of the world’s largest commercial insurance companies, is considering cutting protection for Russia and Ukraine to protect itself from the risk of real claims when sanctions are tightened and the war drags on, an insurance broker said. source who knows the matter.
AIG is looking at adding exemption clauses to policies for companies operating in the region within a range of policies, according to the two sources who declined to be identified.
Other major insurance companies are also seeking to exclude Russia, Ukraine and Belarus from a range of insurance policies, sources said, citing some insurers and policyholders.
Reuters could not determine whether the potential reduction in coverage would apply to all AIG insurance in the countries. The insurance company declined to comment.
“What we̵7;re seeing now are insurers starting to introduce wording in Russia and Ukraine into their policies,” said Meredith Schnur, CEO, head of cyber brokers in the US and Canada at insurance broker Marsh, refusing to name the insurance companies.
Brokers like Marsh act as intermediaries between corporate clients and insurance companies and sometimes get involved in setting up insurance policies.
If AIG were to reduce the coverage for companies and firms operating in Russia and Ukraine, it would be the first major insurer to do so, potentially paving the way for others to follow suit.
While Russia has become a no-go zone for many companies due to sanctions imposed in the wake of Moscow’s invasion of Ukraine, some multinational companies continue to do business there as well as in Ukraine in sectors ranging from agriculture to energy. They require insurance to keep their businesses open.
Local companies also rely on insurance for damage to goods, buildings and vehicles and for injury or loss of life for employees. Reuters could not determine how much of AIG’s operations in Russia and Ukraine were focused on domestic companies.
AIG, which recorded net premiums in general insurance totaling more than $ 26 billion last year, has operations in Russia, according to its website, and is a major global player in sectors such as energy, construction and cyber.
Sanctions against Russia already force insurance companies to withdraw from coverage of limited Russian entities and individuals, while British and European sanctions on aviation insurance extend beyond individual companies to all Russian companies.
Insurance brokers such as Aon PLC and Willis Towers Watson PLC have frozen operations in Russia, while reinsurance companies Munich Re and Swiss Re are among companies that have said they will not write new deals in the country, whether or not potential policyholders are sanctioned.
But AIG and other insurers are looking to go further and add wordings in insurance to exclude coverage for the Russian and Ukrainian operations of Ukraine, Belarus and Western companies, say industry sources.
Insurance companies are worried about reputational damage from doing business in Russia and they are also worried about property damage and late payments in Ukraine, where the economy has been pulverized by the war.
Some policyholders are already struggling to find insurance.
François Malan, chief risk and compliance officer at the French engineering company Eiffage, said last week that he had to accept an insurance ban for the transport of cargo in water near Ukraine.
“It was not negotiable, it was not a matter of price – it was not covered,” he said.
Vessels sailing into the waters around the Black Sea and the Azov Sea, which include the coast of Ukraine, must have additional war risk insurance, which means that they pay a separate premium.
Some insurance companies are also reducing the supply of this type of insurance due to the growing dangers, which include being hit by projectiles or floating mines, say marine insurance sources.
Insurance companies generally add certain types of exclusion to insurance policies that are subject to potential conflicts, for example during the Winter Olympics in South Korea, but do not usually exclude entire regions, as in the case of the Ukraine crisis.
The move to exclude risky areas in their operations reflects the insurance companies’ behavior after the covid-19 pandemic.
In the face of losses estimated at $ 100 billion, insurance companies rushed to exclude COVID-19 first and then all pandemics from insurance.
After also raising premium prices, many of them reported strong gains in 2021, the second full year of the pandemic. Some industry sources say that the losses were smaller than originally expected as a result of these measures.
Last week, S&P Global estimated that commercial insurance companies’ losses from the conflict between Russia and Ukraine could amount to as much as $ 35 billion.
S&P said that the insurance sectors most likely to be affected are aviation, trade credits, political risks such as nationalization, cyber, political violence and naval warfare.
Swiss Re said on Thursday that insurance and reinsurance losses from the invasion are likely to come in about the same way as a medium-sized natural disaster loss as from a hurricane.