Top brokers say insurers must ditch Ukraine ‘arbitration’ exclusions

Stay up to date with free updates

Simply sign up to War in Ukraine myFT Digest — delivered straight to your inbox.

Insurers and reinsurers must drop “arbitrary” exclusions that remove Ukraine from policies and resume coverage to support the war-torn country’s economic recovery, the world’s two biggest insurance brokers said.

New York-listed competitors Aon and Marsh McLennan said Ukraine’s blanket exclusions from policies covering everything from bad loans to property damage, which were put in place after Russia’s February 2022 full-scale invasion, “ignore the diversity of risks throughout the country”. .

In a rare joint call, they pushed for a reversal of insurance and reinsurance industry moves to lock Ukraine out alongside Belarus and Russia in exclusions from broad reinsurance contracts, limiting the supply of primary insurance and “impeding” the country’s economic recovery. Kiev.

The exclusions were part of a market pullback as insurers and reinsurers braced for billions of dollars in losses from destroyed buildings, grounded planes and other damage caused by the Russian invasion. But Kiev’s leaders and Western allies have repeatedly highlighted the importance of the insurance sector to support its economy and enable the huge investment that will be needed for its post-war reconstruction.

John Doyle, chief executive of Marsh McLennan, said the groups were calling on the global insurance sector – which is gathering in Monaco for the annual Rendez-Vous conference – to “end blanket exclusions for Ukraine” and support the country to attract global investment .

Aon chief executive Greg Case said insurers needed to “work to strengthen” already developed insurance initiatives, adding: “Insurance capital is critical to rebuilding Ukraine’s health, energy and agriculture sectors.”

Insurance brokers negotiate with insurers to cover their clients’ assets, from supertankers to credit facilities, against potential losses, with a group of individual insurers typically providing some of the coverage. Aon and Marsh also have large reinsurance brokerage operations that help primary insurers share their risks with reinsurers.

With almost all of Ukraine’s revenue going to its armed forces and its deficit continuing to grow, its leaders have sought insurance schemes as a way to boost trade and investment.

Both firms have been involved in projects that aim to attract some global insurers back to certain areas of Ukraine’s economy.

Last year, Marsh McLennan reached an agreement with Kiev to provide affordable cover to ships carrying grain from its Black Sea ports. This year, Aon unveiled a scheme with a US development agency to insure Ukrainian businesses against war risks.

The wider appetite among insurers to underwrite Ukrainian risks, however, remains minimal.

Ukraine’s economy has rebounded from a 29 percent drop in its GDP in 2022 to grow just under 5 percent in 2023. But GDP growth is expected to slow to 3.2 percent this year, according to World Bank.

In the joint statement, Aon and Marsh said that “arbitrary exclusions for Ukraine contribute to confusion about the very different levels of risk in the country,” highlighting central and western areas where there is much less war damage.

Additional reporting by Isobel Koshiw in Kyiv