France’s risk and insurance management association AMRAE will host a webinar for members on 8 April, to discuss the implications of the Russian invasion of Ukraine on members’ insurance programmes.
While German, Austrian and Italian risk managers are grappling with the big energy supply problems they face because of their nations’ dependence on Russian oil and gas, French risk managers face a broader range of risks, not least the high exposure that French banks have to Russia and the many risks brought by fast-changing sanctions.
For this reason, AMRAE has invited Frédéric Durot, technical director property and casualty, Siaci Corporate & Specialties (part of the Siaci Saint Honoré broking group), and François Delteil, director of political risks and structured finance at AU Group, a leading Paris-based trade receivables and credit insurance broker, to help members work out their potential exposures.
The discussion will be moderated by Michel Josset, prevention and real estate insurance director at motor technology group Forvia, and chairman of AMRAE’s Prevention and Damage Commission.
AMRAE said the Russian invasion of Ukraine means risk and insurance managers need to take a close look at their insurance programmes and work out where they could be affected.
“The Russia-Ukraine conflict has had – and will have – a significant impact on insurance programmes, immediately and in the medium term,” said the association.
The key exposed areas that will be discussed are:
- Suspension of warranty in cargo for the countries affected by the conflict
- Difficulties in implementing insurance programmes linked to sanctions
- The impact of the Russian law of 15 March 2022 concerning the embargo on export operations in insurance and reinsurance
- Risk of territorial exclusion during future renewals
- Operation of political risk policies
- Withdrawal of some brokers from the Russian market.
Meanwhile, analysis of the risk exposure of European banks to the Ukraine crisis has found that French banks are the most exposed.
The European Banking Authority (EBA) published its Risk Dashboard on 1 April, covering the fourth quarter of 2021, which indicates limited direct impact on EU banks from the Russian invasion of Ukraine but also points to clear medium-term risks.
“First-round risks stemming from the Russian invasion of Ukraine are not a fundamental threat to the stability of the EU banking system, but second-round effects may be more material,” states the EBA in its study.
“Cyber and ICT-related risks remain high,” adds the banking body.
The EBA found that banks’ direct asset exposures to Russia, Ukraine and Belarus are concentrated in a few countries, with French, Italian and Austrian banks reporting the highest volume of exposures towards Russian counterparts.
Austrian, French and Hungarian banks were those with the largest exposure towards Ukraine.
It estimates that French banks face exposure of €27.5bn, Italian banks €21.9bn and Austrian banks €21.5bn.
In an earlier note just prior to the Russian invasion, the European Central Bank warned lenders with significant exposure to Russia to ready themselves for the imposition of international sanctions against the country.
“Sanctions would raise considerable risks for the international banks with large Russian exposure, including Citi in the US, France’s Société Générale (SocGen), Austria’s Raiffeisen and Italy’s UniCredit,” it said.
SocGen reportedly has the biggest financial exposure to Russia of any European bank, with €2.6bn, according to research from JPMorgan. Austria’s Raiffeisen has €1.9bn of exposure, while UniCredit reportedly has €1.4bn.
Fitch Ratings subsequently warned that large western European banks’ asset quality would be pressured by the fallout from Russia’s invasion of Ukraine, although high levels of pre-impairment operating profit should mitigate this impact. Fitch also stressed the relatively high exposure of French banks.
“The banks also face materially increased operational risk. They must ensure their operations are compliant with international sanctions against Russia, and their ability to manage Russian exposures, including in their trading books, will be affected by the sanctions. Any severe hit on economic growth from the war in Ukraine will weaken the banks’ business and financial prospects,” said Fitch.
Fitch estimates that western European banks had about $91bn total claims on Russian counterparties at the end of September 2021, based on figures from the Bank for International Settlements (BIS). Of this, $41bn related to local positions in local currencies, mainly exposures held by Russian subsidiaries of foreign banks.
The credit ratings agency said that exposure to Ukrainian counterparties was much lower, at less than $9bn, and mainly from Austrian and French banks.
“Of the large French banks, BNP Paribas and Credit Agricole are the most exposed to Ukraine, due to their local retail banking subsidiaries. The impact on these two groups’ asset quality will be limited given the modest size of the exposures and the self-funded status of the subsidiaries. However, the exposures are likely to generate higher loan impairment charges in 2022, denting the groups’ operating profits,” it said.
“Italian and French banks had the largest cross-border exposure to Russian counterparties, at about $15bn and $10bn, respectively, at end-September 2021, according to BIS data,” said Fitch.
To view the AMRAE webinar, visit www.amrae.fr