The Russian invasion of the Ukraine has roiled political risk insurance markets, with insurers reviewing the capacity they offer and policyholders checking their coverages and exposures with brokers.

“The political violence market has certainly reacted,” said Björn Reusswig, Munich-based head of global political violence and hostile environment solutions for Allianz Global Corporate & Specialty, a unit of Allianz SE.

Political risk insurance covers policyholders against the risk of loss from expropriation of assets by a foreign government, damage due to political violence and sovereign debt default, among other things.

Capacity for exposures in Ukraine is nearly impossible to find, risks in Belarus and Russia are difficult to cover, and capacity for Latvia, Estonia, Lithuania, Poland, Moldova, Georgia and Kazakhstan is getting tighter, he said.

The credit and political risk insurers are reviewing their exposures in Ukraine, Russia, and Belarus as well as all the surrounding regions, said to Neil Duchesne, a London-based managing director in the credit specialties practice of Marsh Specialty. Insurers will seek to understand the implications of the sanctions imposed on Russia and assess the impact of the changed risk environment on existing exposures, he said.

Michel Leonard, vice president, senior economist and data scientist, head of the economics and analytics department at the Insurance Information Institute in New York, said it is “highly unlikely” that insurers would consider issuing political risk or trade credit coverage across Eastern Europe, especially for the Baltic States, Poland, Romania, Hungary, the Czech Republic and Slovakia.

The Institute said political risk insurers issued $19 billion of new coverage globally in 2021 of which $2 billion went to cover risks in Europe and $1.6 billion to cover risks in Russia, based on data from the Berne Union, the trade association representing credit and political risk insurers.

While most underwriters would be reluctant to write anything in Russia or the Ukraine, Poland, as a NATO country, could represent an acceptable risk, said Laura Burns, Washington-based senior vice president, U.S. political risk product leader for Willis Towers Watson PLC.

Client contact is frequent, Ms. Burns said, both with existing policyholders to determine, for instance, if a notice of circumstance that could give rise to a loss should be filed with an insurer, as well as inquiries from prospects, which have come in from companies operating in countries like Poland and others.

“We are getting calls from clients with respect to forced abandonment claims already,” Ms. Burns said. The claims result from a policyholder’s need to abandon an operation or shut it down, even if they have not suffered property damage, she said. Policies are typically multiyear for political risk coverage and can go out as far as 20 years, she added.

Mr. Duchesne of Marsh said claims arising out of the conflict could include physical damage losses as the result of political violence as well as forced abandonment of assets and forced divestiture of Russian shareholdings as the crisis deepens.

Mr. Leonard noted that in addition to policy waiting periods, or time deductibles, of seven to 30 days, it can take weeks or months to assess damages and the conflict needs to cease or lessen in order for parties to be able to quantify losses on the ground.

One possible threat to businesses is the potential seizure of assets by Russian officials in retaliation for sanctions.

Other exposures which could manifest in the wake of the conflict include trade disruptions and cyber threats, sources said. 

Ukraine is a leading exporter of wheat, corn and sunflower oil and seeds, especially to North Africa, West Africa and the Middle East, said Allianz’s Mr. Reusswig.

“Some commodities can be quite politically sensitive,” said Mr. Duchesne of Marsh, adding a price hike on wheat was one of the triggers of civil unrest in North Africa which ultimately led to the Arab Spring in 2011.

Moody’s Investors Services Inc. noted in a report in March that “The military conflict in Ukraine is raising the risk of worldwide cyberattacks against critical infrastructure assets, along with a possible further escalation and increased frequency of cyberattacks against private companies and other organizations.”