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Home / Insurance / Ukraine, Russia aviation and ship insurance at risk from January 1: Sources

Ukraine, Russia aviation and ship insurance at risk from January 1: Sources



(Reuters) — Insurers may refuse to cover planes flying to Ukraine or ships sailing through the Black Sea as reinsurers, who insure the insurers, propose to exclude the region from insurance starting next month, four industry sources said.

Reinsurers typically renew their 12-month contracts with insurance clients on January 1, giving them the first opportunity to reduce exposure since the war in Ukraine started, after suffering this year from losses related to the conflict and from Hurricane Ian in Florida.

A proposed contract clause circulated by reinsurers excludes war-related claims on aircraft or ships in Ukraine, Belarus and Russia, the four sources told Reuters.

Without the support of reinsurers, insurers themselves may be reluctant to provide coverage for the region, they added.

Reinsurers are particularly concerned about the loss of aircraft owned by aircraft leasing companies stuck in Russia, which have already generated $8 billion in legal claims.

Because they operate on an “aggregation basis”

; with marine and air war risk insurance, the losses added together as one, claims in one area make reinsurers wary of the entire war risk sector, David Smith, head of hull and marine liability at broker McGill and Partners said.

“They don’t care if it’s a ship or an airplane, it’s all dragged into the collection.”

While major reinsurers Hannover Re, Munich Re and Swiss Re declined to comment, Chris McGill, head of cargo at insurer Ascot, said the issue was sector-wide.

About 90% of the marine and aviation war risk market is insured in Lloyd’s of London and the wider London commercial insurance market, the sources noted.

Although the sources said negotiations between insurers and reinsurers over next year’s contract and the exact wording of the clause are ongoing, insurers fear the worst.

“It’s a pretty hard line that we’ve seen from the reinsurance market,” said McGill at Ascot, which runs a cargo insurance facility for Ukraine’s grain export corridor.

Aviation reinsurers have already been 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 out their leases.

As a result, aviation insurers are reducing the amount of coverage offered for issues such as aircraft confiscation, even before reinsurers have their say, a fifth industry source said.

Reinsurers are also wary of other war risks, the original sources added, including claims on ships stuck in Ukrainian ports, which were triggered after 12 months, and a Chinese attack on Taiwan.


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