As Russian troops setup roadblocks and occupy government buildings in Crimea, a major brokerage firm is suggesting that insurance carriers have stopped writing new political risk coverage in Ukraine and clients face “greater underwriting scrutiny” if they want political risk coverage in Russia.
"Insurer concern over the political unrest and country credit ratings in Ukraine and potential sanctions in Russia have caused some to effectively stop underwriting political risk insurance in those two countries," New York City-based Marsh Inc. stated Wednesday. "No new political risk or trade coverage is being written in Ukraine."
Former Ukrainian president Viktor Yanukovych left the country shortly before the nation's parliament established a new government on February 27, the United States Central Intelligence Agency notes in its World Factbook.
"Groups that oppose the new government and support closer ties with Russia have staged demonstrations in cities throughout eastern and southern Ukraine,” the CIA stated.
Russian troops have occupied several government buildings, including airports, and established roadblocks on the Crimean Peninsula."
The situation in Ukraine is "fluid," noted Evan Freely, Global Leader of Marsh's Credit and Political Risk Practice, in a release.
"Companies with interests in the region face the potential for damage to assets through political violence and possible broader expropriation measures or sanctions against foreign interests in Russia should sanctions be imposed against the country," Freely stated. "This is in addition to the potential for payment delays on trade payment obligations due from customers, especially those in Ukraine."
Since last November, groups have "staged protests, set up roadblocks and occupied government buildings in several cities throughout Ukraine," the U.S. Department of State notes in a travel advisory. "Ground transportation may be disrupted throughout the country. Drivers, especially in Crimea, may encounter roadblocks that restrict access on certain roads."
The Associated Press noted Tuesday that a referendum on independence is scheduled in Crimea this Sunday.
AP quoted acting Ukrainian Defence Minister Ihor Tenyukh as saying Russia has about 220,000 troops, 800 tanks, 400 helicopters, 150 planes and 60 ships deployed in Crimea and on exercises near the border.
Russia "is the political risk and structured credit market's largest country exposure," Marsh noted Wednesday, warning that "if the current conflict results in large-scale insurable damage, global premiums and insurance capacity for those coverages could be adversely affected."
Marsh added that policyholders "seeking to conduct new business in Russia and Ukraine will encounter difficulties" getting coverage.
"Some insurers are willing to underwrite Russian deals and may honor non-binding quotes on new business," Marsh added. "However, if a political risk insurance policy is quoted, it is likely that organizations will experience delays before binding due to increased underwriting scrutiny."