© Reuters. FILE PHOTO: Aeroflot and Russia Airlines planes are parked at Sheremetyevo International Airport amid the spread of the coronavirus (COVID-19) outside Moscow, Russia, April 8, 2020.
LONDON (Reuters) – Premiums are doubling or rising for some airlines and shipping companies particularly vulnerable to the war in Ukraine, industry sources said, driving up costs for airlines and freight.
According to insurance broker Marsh, who said the war is putting upward pressure on prices, global business insurance premiums rose an average of 11% in the first quarter.
But the grand total masks sharper movements in some sectors and covers only the first five weeks after the invasion.
War is usually excluded from standard insurance policies. Customers purchase an additional war cap on top of that.
As a result of the conflict, aviation war security for Ukraine, Russia and Belarus is no longer available, said Garrett Hanrahan, global head of aviation at Marsh.
For the rest of the world, he said, coverage of the air war has doubled as insurance companies try to recoup some of their losses.
“The Hull War market is starting to recover from higher interest rates.”
The conflict, which Russia describes as a “special military operation,” could result in insurance losses of $16-35 billion in so-called “specialty” insurance classes such as aviation, marine, commercial credit, political risk, and cyber, according to S&P Global ( NYSE 🙂 In a report.
Aviation insurance claims alone could total $15 billion, according to S&P Global, with hundreds of planes chartered in Russia stranded as a result of Western sanctions and Russian countermeasures.
One aircraft rental company described the recent price increases for its insurance company as “not a pretty sight”.
One insurer said some aircraft lessors – a particularly exposed segment of the market because their planes are stuck in Russia – will now have to pay 10 times their original premiums, while another said insurers can “call their price” to lessors.
For marine insurance, policyholders pay an additional “breach” premium when the vessel enters particularly dangerous waters, and Lloyd’s Market updated positions.
For the area around the Russian and Ukrainian waters of the Black Sea and the Sea of Avov, this amount has increased several times, according to three insurance sources, from 0.025% before the invasion to about 5% of the ship’s value, which amounts to millions of dollars for the seven-day policy.
Every time a ship enters these waters, it has to pay this extra premium.
Two sources said prices for ships sailing to other Russian waters also rose by at least 50% after Lloyd’s Market rated all Russian ports as high risk.
Because of the risks, some transportation insurance companies have discontinued their coverage of the area.