The insurers are reacting to global sanctions imposed on Russia for its invasion of Ukraine, as well as risks to the Russian economy that could make it impossible for Russian businesses to meet contractual obligations.
“It’s amazing how quickly the spigot turns off in our world,” said Jerry Paulson, a senior vice president at Chicago insurance brokerage HUB International Ltd. “Everything is coming to a halt, and this is just one more thing that will negatively affect commerce with Russia.”
Mr. Paulson had been in discussions with insurers for several months to secure political-risk coverage for a US industrial client with distribution centers and a factory in Russia. Six insurers, he claims, have either paused or declined his client's business.
Customers with political-risk insurance are compensated for losses caused by government actions such as war, expropriation, and forced asset sales. Trade-credit insurance, which protects businesses when their trading partners fail to pay for goods and services, is another major type of coverage that has been reduced.
Many businesses will not do business unless they have trade-credit insurance. According to industry brokers and executives, this could result in a freeze in trade with Russia, which would be another blow to an economy already reeling from the effects of historic sanctions.
Other insurance products' prices have risen in recent weeks as the likelihood of a fight has increased. According to a tanker company executive, obtaining insurance to sail into Ukraine's Black Sea ports is nearly impossible. According to this person, insurers in the Lloyd's of London market charge up to 2% of the value of a new-build tanker, which equates to about $800,000, for 10 days of coverage to operate in Russia's Black Sea ports such as Novorossiysk.