Global insurers are starting to write Ukrainian risks again under local policies as the market stabilizes, after pulling back from issuing local policies in the immediate aftermath of Russia’s invasion and instead providing coverage under the master policy, according to Janet Pane, director of global services. at Willis Towers Watson PLC.
But she warned buyers that insurers are returning to the market with more, and often broad, exemptions. But some risk managers are successful in removing such language if they are prepared to make their case, the broker added.
Mrs. Pane explained that after the outbreak of war in Ukraine, the major insurance companies withdrew coverage for multinational companies with risks in both Ukraine and Russia.
Russian risks were met with “hard exclusions”;, so global brokers had to refer clients to Russian brokers to place local policies, she said. “It was challenging and the clients needed a lot of hand-holding through it because they’re not markets they understand,” Pane said.
She added that while there was a “philosophical desire” to continue underwriting Ukrainian risks, this was challenging because insurers could not issue local policies.
Therefore, these risks tended to be put into the master program and covered via a non-traditional use of the FINC clause, the broker explained.
“But generally there was a lot of volatility in the market response and a lot of variation,” she continued.
Pane said much of the confusion and concern from insurers was fueled by the tricky industry sanctions placed on various companies and industries operating in and dealing with Russia.
“It is easy when there are absolute sanctions. We know what it looks like and are easier to deal with. When new sanctions were imposed, it created a very challenging landscape. Some legal teams within organizations have a more risk-based approach and others are very conservative. So we saw that play out in the market response and who was willing to continue to include coverage and who quickly opted out and backed out, she said.
The good news is that this has started to calm down and the market has started to stabilise, the broker continued.
“There was a lot of confusion in the market early on about what could be done. I think we’ve now come out the other side and some of the legal departments have agreed that yes, if it’s done right, the best option is to de-risk and place coverage locally in that market,” she says.
This has prompted some of the major global players to start writing local Ukrainian politics again.
“We’re seeing some markets getting back on board and starting to write the local policies in Ukraine. So that’s really good news. Not everyone is there yet but we’re seeing some of the bigger insurers being able to do that,” Pane said.
As coverage slowly returns, the biggest challenge for the insured now is exclusion language. But Ms. Pane encourages risk managers to work with the market, saying that with the right information, these exemptions can be removed.
“The advice we always give to clients is to get out early, work with your insurance company and challenge some of the exclusions. We see some of them are quite broad. If you have the right discussion and you drive it up the flagpole from the local underwriter up to management, and if you’re a good risk, we see that we can remove most of the exclusionary language, especially when it’s too broad,” she said encouragingly.
And Ms. Pane added that events such as the war in Ukraine are driving a shift from traditional insurance products to more niche lines such as trade credit and political risk.
“Political risk is a great product and one that is finally seeing its day because it is non-cancelable and is written on a multi-year basis. It becomes the wrap over your property, terrorism or other coverages,” she said.
“It’s time for companies to start exploring what they can do when they encounter default exceptions. It will lead them to some of the solutions that have always been there but probably weren’t bought as often as they are now, she added.