Commercial credit insurers withdraw from Russia and Ukraine after invasion

LONDON, March 4 (Reuters) – Commercial credit insurers, which provide a financial safety net for exports and imports, are withdrawing cover for companies exporting to Ukraine and Russia after the invasion of Moscow, given the risks of penalties, high claims or missed payments, say industry sources.

The move will increase pressure on Russia’s ailing economy, already battered by a host of Western sanctions and shunned by a growing number of businesses. Read more

“Over the past week, commercial credit insurers will have suspended new risk underwriting for Ukraine and Russia,” said Nick Robson, global head of credit specialties at insurance brokerage Marsh.

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Businesses purchase trade credit insurance if they provide goods or services to other businesses on credit, to protect against the risk of not being paid or being paid late.

The global trade credit insurance market guarantees nearly $3 trillion in trade receivables, according to the International Credit Insurance & Surety Association.

State-supported export credit agencies also provide insurance, in addition to private commercial credit insurers.

Leading private sector European commercial credit insurers include Euler Hermes, owned by insurer Allianz (ALVG.DE), Atradius and Coface (COFA.PA).

Robson said the lack of availability of trade credit insurance will impact exporters of food, textiles and electronics to Ukraine and Russia, as well as those supplying products to the sectors of Ukrainian agriculture or Russian energy.

Unlike most insurance policies, which are valid for a year or more, credit insurers often have more leeway to refuse to write new business under a specific short-term policy.

Insurers will hold new business to verify that they are not doing business with sanctioned entities, industry sources said.

The physical and economic impact of the war will increase the likelihood that Ukrainian companies buying goods from the West will default, increasing the risks for trade credit insurers.

Additionally, restrictions on payments between Europe and Russia are making insurers nervous about paying for exports to Russia.

Commercial credit insurers could also take an ethical stance toward Russia, said Bernie de Haldevang, head of credit, political risk and crisis management at insurer Canopius.

“Is it a pure risk factor, do insurers still want to take risks in Russia and Ukraine? Or is it a political decision and is there an ESG (environmental, social, governance) factor? Should insurers continue to support Putin’s war chest?

Euler Hermes said: “Given the current context and the high uncertainty about what will happen next, we are adjusting our underwriting strategy to the gravity and urgency of the situation.”

Atradius said it was important to “stay in close contact with our customers to ensure good communication on actions related to their business and exposure in the region and that we are doing our best to help them manage them” .

Coface declined to comment.

As for the ongoing cases of commercial credit insurers in Ukraine and Russia, they will face significant claims in the coming weeks if exporters are not paid.

They also watch if the war escalates.

Trade credit insurance, like many other types of trade insurance, usually has a war exclusion.

Under this war exclusion clause, policyholders cannot claim war-related losses if there is a conflict between two of these five great powers – the United States, Britain, France , China or Russia.

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Additional reporting by Noor Zainab Hussain in Bengaluru. Editing by Jane Merriman

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