Russian invasion's impact on insurance


War is excluded as a cause of loss in property policies and all war insurance policies are cancelled automatically if the conflict is a war between any of the five United Nations Security Council nations: U.S., U.K., France, China and Russia. Direct insurance losses from the Russia/Ukraine war are not expected to be exceptionally large. So, nothing to worry about, right? The Russian invasion’s impact on insurance is cause for some concern.


Cyber coverage is a relatively young industry, and lacks defined standards of accountability. In a December 2021 report Marsh McLennan said that U.S. cyber insurance pricing increased an average of 96% in the third quarter of 2021. Marsh said the increase was due to worsening losses form an increased frequency and severity of ransomware claims, as well as the potential for a single attack to hit multiple policy holders at once.

The war exclusion typically states that losses inflicted by armed combat aren’t covered. Even though cyber warfare isn’t armed combat, hacking and military action could be linked and trigger the exclusion. The recent 2017 NotPetya hack which crippled companies including pharmaceutical giant Merck was presumed to be Russia. The question of whether Merck’s $1.4 billion in losses were covered by its property and casualty policy ended up in court, and in January 2022 a judge ruled that the insurers were unjustified in blocking Merck’s claims and overreached in invoking the war exclusion. This verdict may push insurers to rethink their approach to cyberattack coverage, another Russian invasion’s impact on insurance.


Russia is responsible for over 40% of global palladium production. There are between 3 and 7 grams of palladium in catalytic converters, required on all U.S. cars and trucks. In the past decade the price of palladium has quadrupled from $680/ounce to $2800/ounce. A shortage and pricing increase that is driving more catalytic converter theft, pushing up auto physical damage insurance claims and leading to higher auto insurance premiums.


Before the war there was a debate whether inflation would be transitory or long term. The war has convinced most forecasters that inflation will be with us long-term. Russia is not only a major source of Palladium but for wheat and potash for fertilizers and a significant supplier of oil and gas to Europe. If Russia cuts off their oil and gas supply to punish Europe the price could go even higher than its current highest price in 14 years.


Like most industries in Russia, the insurance market is highly concentrated and closely connected to the oligarchs. Sogaz controls 25% of the country’s market share of insurance premiums and their CEO, Yuri Kovalchuk, is on the specially designated nationals list. A. M. Best put Sogaz and the three other top Russian Insurers, Russian Reinsurance, Ingosstrakh and GIC Perestrakhovanie, “under review with negative implications” while S&P took a bolder step and downgraded both Sogas and Ingosstrakh.

If these insurance carriers suffer liquidity constraints, a decrease in the value of their investments, elevated claim costs and an inability to recover losses from their reinsurers, their collapse could contribute to the eventual collapse of the Russian economy. Certainly all due to the Russian invasion’s impact on insurance.

The Russian invasion’s impact on insurance is clearly high. Does the war exclusion in the policy help price and define these risks? Contact Smith Hanley Associates’ Actuarial Executive Recruiter, Rory Hauser at to discuss further.

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