Canadian Underwriter

Ukraine war insured losses could outstrip 9-11

April 20, 2022   by Philip Porado

Bombed out building in Ukraine painted in flag's colours.

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When adjusters are finally able to assess the damage stemming from the war in Ukraine, costs may exceed the Sept. 11, 2001 terror attacks as the largest industry-wide insured loss, across all classes of business, in history, said a specialty lines briefing from loss-estimates reporting firm PCS.

“Aggregate industry-wide insured losses could exceed approximately US$20 billion based on market intelligence available to date,” PCS said. “The flow of information is but a trickle compared to what will likely come through when loss adjusters eventually gain access to affected sites.”

The briefing breaks risks down by economic sector:


Aviation – Global insurers and reinsures are examining losses tied to aircraft leasing, with reported estimates ranging from US$5 billion to US$10 billion. “There is the potential for some loss to be borne in the air carrier market and potentially by manufacturers, through the financing arrangements in place with aircraft leasing companies,” PCS said. “The overall insured loss, simply, could wind up distributed across the supply chain, rather than concentrated on one particular link.” Sanction-related restrictions on takeoffs and landings could reduce lessors’ ability to return aircraft. Sanctions also are expected to create parts and labour shortages that will make maintenance difficult and reduce aircraft values.


Marine – Designation of the Black Sea and Sea of Azov as war areas by the Joint War Committee in London may dampen overall losses but, “PCS clients have indicated that the inability of vessels to move freely and safely in the region makes trapping and blocking a real concern,” the briefing said. Port closures and potential physical damage are expected to cause losses, with clients also raising concerns about cargo losses. “Some see it as contributing minimally to the industry-wide insured marine loss,” said the briefing, “while a differing perspective notes the volumes of grain that used to move through the affected ports and the potential for spoilage.” Overall, PCS is using a US$5 billion working estimate for industry-wide insured marine loss.


Personal and small commercial property – Sources providing data and anecdotes to PCS estimated losses could reach US$100 million. “Ukraine’s low rates of insurance penetration and lower insured values should keep the industry-wide insured loss for this sector manageable,” the briefing said.


Property per risk – While these losses could take the longest to accumulate, “This class of business, after aviation, could be the greatest contributor to the overall industry-wide insured loss in Ukraine,” PCS said. Steel and grain account for 40% of the country’s GDP and other exposed sectors include manufacturing, mining, technology/media/telecommunications, financial services and consumer business.


Energy – The briefing said most insured energy losses will likely come from the onshore sector, with windfarms alone sustaining as much as US$850 million in insured losses. Nuclear facilities that have sustained damage or other disruption also are a concern. “It is difficult to forecast a potential industry-wide impact for this sector,” said the briefing, “but client conversations suggest that industry-wide insured losses of above US$2 billion seem likely, particularly with windfarms and nuclear facilities potentially accounting for half that.” It added nuclear losses tend to be expensive due to the need for specialized labour and materials to make repairs.


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