Global insurers begin issuing local Ukrainian policies after pulling back

Exclusions can be watered down with right approach

Global insurers are beginning to write Ukrainian risks again under local policies as the market stabilises, having pulled back from issuing local policies in the immediate aftermath of Russia’s invasion and providing cover under the master policy instead, according to Janet Pane, head of global services solutions at WTW.

But she warned buyers that insurers are returning to the market with more, and often broad, exclusions. However, some risk managers are successfully removing such language if they are prepared to make their case, the broker added.

Pane explained that following the outbreak of war in Ukraine, the big insurers pulled back on cover for multinationals with risks in both Ukraine and Russia.

Russian risks were met with “hard exclusions”, so global brokers had to direct clients to Russian brokers to place local policies, she said. “That was challenging and clients needed a lot of hand holding through that because they are not markets they understand,” Pane said.

She added that while there was a “philosophical desire” to continue underwriting Ukrainian risks, this was challenging because insurers couldn’t issue local policies.

Therefore, these risks tended to be put in the master programme and covered via a non-traditional use of the FINC clause, the broker explained.

“But in general there was a lot of volatility in market response and a lot variance,” she continued.

Pane said a lot of the confusion and concern from insurers was driven by the tricky sectorial sanctions placed on various companies and industries operating in, and dealing with, Russia.

“It’s easy when there are absolute sanctions. We know what that looks like and is easier to deal with. As new sanctions were being imposed, it created a very challenging landscape. Some legal teams within organisations take a more risk-based approach and others are very conservative. So we were seeing that play out in the market responses and who was willing to continue including coverage and who was quickly excluding and backing away,” she said.

The good news is this has begun to settle down and the market has started to stabilise, continued the broker.

“There was a lot of confusion in the market early on about what could be done. I think we have now come out the other side and some of the legal departments have agreed yes, if done in the right way, carving the risks out and placing cover locally in that market is the best option,” she said.

This has seen some of the big global players begin writing local Ukrainian policies again.

“We are seeing some markets come back onboard, starting to write those local policies in Ukraine. So that is really good news. Not everyone is there yet but we are seeing some of the bigger insurers being able to do that,” said Pane.

With cover slowly returning, the biggest challenge facing insureds now is exclusionary language. But Pane encourages risk managers to work with the market, and said with the right information these exclusions can be removed.

“The advice we always give to clients is get out early, work with your underwriting community and challenge some of the exclusions. We see that some of them are fairly broad. If you have the right discussion and you run that up the flagpole from the local underwriter up to management, and if you are a good risk, we are seeing we are able to get most of that exclusionary language removed, particularly when it is overly broad,” she said encouragingly.

And Pane added that events like the war in Ukraine are driving a shift from traditional insurance products to more niche lines such as trade credit and political risk.

“Political risk is a great product and one that is finally seeing its day because it is non-cancellable and is written on a multi-year basis. It becomes the wrapper over your property, terrorism or other coverages,” she said.

“It is time for companies to start exploring what they can do when they come across standard exclusions. It will direct them to some of the solutions that have always been there but probably weren’t bought as frequently as they are now,” she added.

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