Ukrainian insurers plead for help in disabling Russian business

Published in: Risk, Conduct risk, Investment

Companies: Insurance Business Association, League of Insurance Organizations of Ukraine, Kharkiv Union of Insurers, National Association of Insurers of Ukraine, Federation of Insurance Intermediaries of Ukraine, Insurance Europe, Association of British Insurers, Aviva, Allianz

Editor's note: This story was updated on 3 March with Zurich's response and mention of the new UK sanctions in the final paragraph

Leaders of the Ukrainian insurance sector have implored European and global peers to assist in the defence of their country, by ceasing underwriting and investment in Russia.

Representatives of five trade bodies have asked insurers outside the country to take four measures (see box, below), “that will prevent the country-aggressor from continuing the war”.

The Insurance Business Association, the League of Insurance Organizations of Ukraine, the Kharkiv Union of Insurers, the National Association of Insurers of Ukraine and the Federation of Insurance Intermediaries of Ukraine have all signed the letter.

 

Ukrainian insurers' demands

  1. Regardless of the sanctions imposed at the state level, do not insure or reinsure any risks of Russian insurance companies, risks originating from the Russian Federation or in relation to the interests of any resident entities of the Russian Federation. Risks from Russian insurers and from the territory of the Russian Federation should be recognised as highly "toxic" ones.
  2. Do not invest in Russian insurance companies and do not issue financial guarantees or additional capital to them in any form. Block the funds of Russian insurers and reinsurers, do not make any reinsurance payments, refunds of payments, etc. for the Russian Federation, so as not to provide the country-aggressor with any additional financial resources.
  3. Stop activities of the subsidiaries of the Western insurance or brokerage companies, as well as their representative offices in Russia.
  4. Disconnect Russian insurers from any information and educational support, conferences, seminars and trainings.

Muted reaction

The reception from European insurance trade associations has been muted so far, with some not even expressing condemnation of the Russian invasion.

Insurance Europe told InsuranceERM: “We have received the letter and are currently collecting feedback from our members.”

A spokesperson for The Association of British Insurers said: “The events in Ukraine are deeply disturbing, and our thoughts are with those affected. Our members are monitoring closely and reacting to developments in this fast-moving situation, including continuing to support the implementation of any sanctions put in place.”

However, some European firms have already begun taking voluntary action.

Aviva’s chief executive Amanda Blanc revealed today the UK insurer would divest “as soon as we practically can” the approximately £240m ($320m) in Russian bonds and equities held by Aviva Investors’ funds.

The impact will be relatively minor, as it represents less than 0.1% of the division’s £268bn of assets at the 2021 year-end. Aviva has no other exposures in Russia.

A spokesperson for Zurich told InsuranceERM it had stopped underwriting new business in Russia and is not renewing policies from existing domestic customers in Russia.

Zurich has “a very limited P&C [property and casualty] exposure to Russia and Ukraine” and the exposure to Russia through Zurich’s own investment portfolio “is very low”, the spokesperson added.

Austrian insurer Uniqa owns 75% of Russian insurer Raiffeisen Life but a spokesperson for the company said Raiffeisen Life has no shareholdings in companies that are on the current sanctions list or that have a relevant connection to those who are on the sanctions list.

Asked about Uniqa’s exposure to Russian assets, the spokesperson told InsuranceERM: “In order to be able to provide our customers with the necessary guarantees for life insurance policies, it is unavoidable to hold Russian government bonds. Accordingly, we hold government bonds in the amount of approximately €200m ($218m). Beyond that, there are no contracts with government-related companies."

Allianz: it’s all paralysed

Allianz, which has businesses in Ukraine and Russia, said it is evaluating its exposure to the “complex and dynamic” situation, but has not settled on imposing any insurance-related sanctions as yet.

A company spokesperson said it had ceased all investment into Russia “two weeks ago,” under ESG grounds. But Allianz had not yet decided to cease its insurance operations in the country.

Currently, insurance business is running but “probably not at the same high intensity as before this invasion happened.”

“The operations are running to the extent that it is possible under the current conditions, and obviously, in full compliance with whatever regulation and the sanctions as they are,” said the spokesperson.

“There is no point in time where we say when this happens, we will effectively [do this]. Right now, the framework of sanctions is already so tight, there is only so much you can do. If you want to invest or divest assets, it’s all paralysed at the moment.”

The spokesperson said Allianz’s overall exposure to Russia and Ukraine is about 0.2% in terms of revenue and operating pre-tax profits. This includes investment exposure, the majority of it in Russia. The group has 1,250 employees in the region.

“The war is seven days old, so it is premature announcing drastic changes,” the spokesperson added. “But you can still have a strong position on it.”

The insurer has come under the spotlight recently with chief executive Oliver Baete calling out the “unprovoked attack on the independent and democratic state of Ukraine.”

“This invasion offends the values of all people who believe in open and free societies,” he wrote in a statement.

Allianz has pledged €12.5m ($14m) in humanitarian aid to Ukraine.

InsuranceERM has also contacted Generali and Uniqa, all of which have operations in Russia, for comment on the Ukrainian statement.

Help on the ground

Several insurers have announced substantial aid packages.

Dutch insurer Aegon said it “strongly condemned” the Russian aggression, and announced a €1m donation to the Red Cross this week to support humanitarian efforts in Ukraine.

Germany’s Talanx / HDI Group, through its subsidiaries in Poland and Hungary, has launched an aid package for refugees and direct aid in Ukraine amounting to more than €2.5m.

Neighbouring countries have been helping Ukrainian motorists travelling across the borders. The Polish Insurance Association has announced its national insurers PZU, Ergo Hestia and Warta would provide free 30-day insurance coverage for vehicle owners who enter Poland with vehicles with Ukrainian registration numbers.

Czech insurers are adopting a similar measure. The board of directors of the Czech Insurers' Bureau (ČKP) decided that for two months from leaving Ukrainian territory, any damage caused by Ukrainian vehicles in the Czech Republic will be reimbursed by ČKP to the guarantee fund without any impact on Ukrainian motorists.

Denmark’s LB Forsikring announced yesterday it has expanded the coverage on contents and liability insurance to cover Ukrainian refugees who have moved in with one of the mutual insurer’s 412,000-plus members.

Direct sanctions

The EU and UK have issued direct sanctions against just two Russian insurance businesses.

Both jurisdictions had pre-existing sanctions against The First Crimean Insurance Company, for its participation in the project of connecting the railway infrastructures of the illegally annexed Crimea and Russia by insuring the construction of the bridge over the Kerch Strait.

The EU this month sanctioned Gas Industry Insurance Company SOGAZ for the same reason.

Russian bank Rossiya, which has “contributed to the provision of insurance and investment throughout Crimea and Sevastopol”, is also sanctioned by the UK and EU. 

Re/insurance of the aviation and space sectors has also been sanctioned by the UK and EU.

Cintia Cheong, Sarfraz Thind, Christopher Cundy