97 days into the Ukraine-Russia war, the ongoing effects of the strife are only becoming clearer. A recent announcement from Reuters has highlighted that industry quotations are seeing insurance premiums doubling or more for flight and marine businesses which are particularly exposed to the war, boosting expenses for airline and shipping firms.
Earlier this year, the security broking giant Marsh revealed that global commercial insurance premiums rose 11% on regular in the first quarter, with the war settling upward pressure on rates. However, Reuters noted that this figure obscures stronger moves in some sectors, and only covers the first five weeks of the incursion. It also highlighted that war is typically prohibited from mainstream insurance policies.
Reuters quoted Garrett Hanrahan, accepted head of aviation at Marsh, who said flight war insurance was no longer accessible for Ukraine, Russia and Belarus as a finding of the conflict. For the rest of the world, he said, aviation war cover has made twice as much, as insurers try to regain some of their losses.
Hanrahan added: “The hull war market is starting to reflate itself through rate rises.”
Meanwhile, a new report from S&P Global identified that the war which Russia calls a “special military operation”, could lead to insurance losses of $16 billion-$35 billion in so-called “speciality” security classes such as aviation, marine, and trade value, political risk and cyber. Aviation alone could total $15 billion, according to S&P with hundreds of leased planes deserted in Russia.
Reuters highlighted the impression of one aircraft lessor who described recent rate increases on its security as “not a pretty sight”.
Some aircraft lessors – who operate in an especially exposed area of the demand as their planes are stuck in Russia – are now having to pay 10 times their original dividend, one underwriter said, while another said insurers could “name their price” to lessors.
In ship insurance, Reuters added, policyholders pay an extra “breach” premium when a ship enters particularly dangerous waters, locations which are updated by Lloyd’s market.
For the area around Russian and Ukrainian waters in the Black Sea and the Sea of Azov, this has boosted multiple times, according to three insurance sources, to around 5% of the value of the ship, from 0.025% before the invasion, amounting to millions of dollars for a seven-day policy. Each time a ship goes into those waters, it has to pay that extra premium.
Rates for ships going into other Russian waters have also risen by at least 50% after Lloyd’s market categorized all Russian ports as high risk, two of the sources told Reuters. Because of the dangers, some marine insurers have also stopped giving cover for the region.