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Impact of the war on German insurers

Russia launched a military attack on its neighbour Ukraine. The invasion started a war in the heart of Europe; it brings suffering to the people and results in numerous sanctions imposed by the west. The insurance sector’s reaction is clear: We #standwithUkraine.

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Solidarity with Ukraine

“We condemn this war of aggression, and our thoughts are with the people in Ukraine,” said Jörg Asmussen, CEO of the German Insurance Association (GDV). “So far, the war's direct economic impact on German insurers has been limited because their exposure to the Ukrainian and Russian markets is negligible,” explained Asmussen. “In the short term, wars often have a substantial impact on international capital markets; long-term consequences are rare, though.”

How the financial and economic sanctions imposed by the west and Russia’s counter-sanctions play out, remained to be seen, Asmussen said. Increased geopolitical uncertainty and higher energy and food prices are likely to weigh on economic activity and, by extension, put a strain on German insurers, too.

How will German insurers be impacted?

In insurance, most lines of business are predominantly nationally oriented, which means sanctions won't play much of a role there. However, there are a select few lines where the war and its consequences could in fact become noticeable.

What is the Ukraine war's impact on life insurance?

The GDV now expects a life insurance premium growth of less than 1% in 2022, down from a forecast of up to 2% before the war. The rationale behind this is that there is much more uncertainty in the economic outlook of private households because of the war. Also, the GDV sees higher energy prices as an additional burden on consumers. “In times of crisis, decisions about long-term provision and safeguards tend to take a back seat”, Asmussen explained. “We have already seen this during the Covid-19 pandemic.”

What is the Ukraine war's impact on transportation insurance?

There is no noticeable impact of the war on transportation insurance revenues – neither in relation to Ukraine nor in relation to Russia.

The war cover in goods transport insurance only applies to damaged cargo on ships or air planes, if the sea voyage or flight began before the war broke out. War on land is usually not covered.

What is the Ukraine war's impact on marine insurance?

Marine insurance generally includes a very comprehensive war cover. With respect to certain areas in the Black Sea, marine insurers have terminated war cover in recent weeks and introduced war surcharges in some cases.

What is the Ukraine war's impact on aviation insurance?

On the German aviation insurance market, there is no material impact on revenues and claims to be expected. War cover may be terminated on short notice in aviation insurance. In most cases, however, the actual insurance cover will not end then, but be maintained for an additional premium. When war cover is in fact terminated by insurers because of the current Ukraine crisis, this is likely to apply only to certain airlines and regions. Which means, the war cover still applies to other airlines and regions.

On an international level, however, there is a danger of substantial losses: Russian airlines did not return numerous leased airplanes, as requested by the leasing companies in connection with the sanctions imposed by the west, but rather registered those airplanes as their property in Russia. The leasing companies thereby incur multi-billion losses that may be insured under certain circumstances. It is mainly the London insurance market that is affected here. German insurers might have exposure via their London branches, though.

What is the Ukraine war's impact on cyber insurance?

Insurers expect a higher risk of cyber-attacks, even if they haven't seen an increase in claims yet. We have answers to the most important questions on this topic here.

What is the Ukraine war's impact on credit insurance?

Credit insurers are watching very closely how the conflict and the sanctions against Russia evolve and they adapt their individual underwriting policies accordingly. War exclusion clauses are common in credit insurance, too. Some insurers do not only cover economic risks, such as buyer's default, but also political risks. In particular, such policies insure scenarios where the seller does not receive money as a result of political actions, such as interdictions of payments or trade restrictions.

How many German insurers have subsidiaries in Russia?

Russia is a fairly closed market where former state-owned enterprises still play a dominant role, even more so after the sanctions. In 2016, the Russian central bank reacted to sanctions by setting up a state-owned reinsurer that insures everything that could be affected by sanctions. Until recently, international insurance companies were only able to do business in Russia via fully capitalised subsidiaries or fronting. This restriction has only been lifted in the summer of 2021. Nevertheless, German insurers do have some business in Russia.

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