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While there continues to be increased interest in political risk coverage globally, concerns over instability in the Ukraine have led insurers to largely stop underwriting political risk policies in the region.
The situation in the Ukraine has prompted a drawing back of political risk coverage, says Simon Low, political risk and crisis management underwriter at Canopius, who tells Bermuda:Re that insurers are extremely reluctant to underwrite exposures in Ukraine due to the unpredictability of the current situation.
The continued upheaval in Ukraine with Russia and the West holding opposing views is leading to Russian risks being treated equally conservatively with underwriters taking the same stance in Russia as they are in Ukraine and Crimea, said Low.
Those looking for political risk coverage in the region will be looking to the market for feedback, says Low. “The natural response from underwriters is to wait for a bit more certainty and direction around the risk, especially with the Ukrainian elections being imminent, before issuing any new policies in the region.”
Current policyholders with exposure in those countries can expect considerable rate increases when they look to renew or may find some insurers have withdrawn from this market. Companies looking to conduct new business in the region will likely encounter considerable difficulties obtaining coverage.
The anticipated implementation of economic sanctions on Russia and the new Crimean government are expected to lead to further payment delays and potential reprisals against foreign assets in those countries, further complicating matters. “There is uncertainty about what types of sanctions will be put in place, for how long and how it will affect investment and trade in the region.”
What is apparent is that political risk in the region is high, with major economic implications for companies working in the region. Events have served to highlight the importance of political risk coverage, even if newly issued coverage is not now available.
Despite a reticence to provide coverage in the Ukraine and Crimea however, improving global economic conditions are encouraging greater investor interest in political risk coverage around the world, says Low.
Large infrastructure projects often contain a political risk element and it is evident from speaking with Low that Canopius’ footprint in political risk is global and growing, much as the market for political risk is.
Canopius, political risk, Ukraine, insurance