Marsh’s Advice on Political Risk Market Concerns over Russia, Ukraine Turmoil

“Insurer concern over the political unrest and country credit ratings in Ukraine and potential sanctions in Russia have caused some to effectively stop underwriting political risk insurance in those two countries,” according to today’s briefing from Marsh. However, Marsh also indicated that the “turmoil is not expected to cause a large-scale impact to the political risk, structured credit, and trade credit market.”

Evan Freely, Global Leader of Marsh’s Credit and Political Risk Practice, said: “The current situation in Russia and Ukraine is extremely fluid. Companies with interests in the region face the potential for damage to assets through political violence and possible broader expropriation measures or sanctions against foreign interests in Russia should sanctions be imposed against the country. This is in addition to the potential for payment delays on trade payment obligations due from customers, especially those in Ukraine.”

Marsh noted that “because Russia is the political risk and structured credit market’s largest country exposure, if the current conflict results in large-scale insurable damage, global premiums and insurance capacity for those coverages could be adversely affected.

“In the meantime, companies seeking to conduct new business in Russia and Ukraine will encounter difficulties obtaining coverage. No new political risk or trade coverage is being written in Ukraine, Marsh notes. Some insurers are willing to underwrite Russian deals and may honor non-binding quotes on new business. However, if a political risk insurance policy is quoted, it is likely that organizations will experience delays before binding due to increased underwriting scrutiny.”

In light of the ongoing nature of the crisis in Ukraine and Russia Marsh advised companies “to review all insurance policies and clearly understand their limits and sublimits, deductibles, loss-reporting requirements, covered perils, and other restrictions.

“For trade credit insurance specifically, organizations should maintain an open dialogue with their insurer regarding their customers’ ability to pay as well as the insurer’s underwriting strategy.”

Source: Marsh