Russia-Ukraine conflict: Overview of risk considerations

The Russia-Ukraine conflict has brought tragic losses of life and destruction across Ukraine, with more than 2 million refugees streaming into neighboring countries in just two weeks.

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The Russia-Ukraine conflict has brought tragic losses of life and destruction across Ukraine, with more than 2 million refugees streaming into neighboring countries in just two weeks. As the heavy bombardment of Ukrainian cities and clashes continue, the rising death toll and unfolding humanitarian disaster are of paramount concern.

The crisis is also causing political and economic disruptions across the world, with businesses navigating conflict-related risks to their people, assets, operations, and supply chains in the region and globally. Companies also are seeking legal advice on the possible impact of an evolving sanctions regime on their businesses. In terms of insurance, premium payments or claims transactions may be stopped, or there may be delays, while banks request further information before processing.

Marsh is following the conflict, and public and private sector responses to it, closely. Below we provide an overview of several key insurance and risk implications.

Political risk

The risk of expropriation remains high in Russia, including in its territorial waters. Retaliation against third countries’ vessels and cargos, including potentially a full blockade, could disrupt trade flows and divert attention from the fragile environmental situation along the route.

If the Russian government freezes assets in the country, businesses may be unable to extract revenue from their subsidiaries and support their employees. Meanwhile, lack of Russian access to global trade and debt markets will undermine the operations of multiple supply chain participants.

Marsh recommends that insureds affected by the conflict read their policies to understand the specifics of their coverage and speak to their broker if anything is unclear.

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Trade credit

In terms of trade credit risks, traders with Russian and Ukrainian contracts are likely to suffer payments delays and defaults. Although, as payment terms under insurance policies are usually 120 to 180 days, the extent of non-payments will not emerge for some time.

The removal of some Russian banks from the SWIFT global payments messaging system will undoubtedly impact numerous trade payments. However, there may be willingness on the part of Russian companies to pay for goods via other means, such as through offshore bank accounts.

Under martial law in Ukraine, suppliers of goods and services to the country cannot be paid until the moratorium is lifted, unless those goods and services support the mobilization of forces to defend the country.

New supplies to buyers in affected territories are unlikely to be covered by insurers or subjected to a specific approval procedure, even when a valid credit limit still exists, or in the presence of binding orders. Ahead of shipping, customers should read carefully available communications by insurers on new supplies and revert to their broker for any clarification to avoid future claim disputes.

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There is widespread concern that cyberattacks could intensify as the crisis deepens, with impacts that could be both regional and global, including in countries imposing economic sanctions on Russia.

Companies should align their organization on their cyber risks and risk management approach, and should consider available resources to guide their enterprise-wide cyber resilience.

When an organization implements the recommended controls, they will be better able to prevent, or be equipped to respond to, the majority of cyberattacks in a way that minimizes their impact.

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Broad and fluid sanctions are creating significant challenges for aviation insureds and insurers. The EU, UK, US, and other nations have included in their sanctions a specific prohibition on aviation-related (re)insurance.

Marsh recommends that insureds with potentially exposed assets seek sanctions legal advice and to reach out to their Marsh representative with regard to the impact on their policies.

The following actions may also be taken:

  • Mitigate risk by working with lessees to move any assets out of Russia or other exposed locations.
  • Issue a first party precautionary notification of potential loss(es) to lead insurers that may be asked to respond in the event of an actual loss. Policies, for example, can include an aircraft financier/lessor’s hull all risk and hull war, as well as aircraft financier/lessor’s excess war coverage.
  • Issue a precautionary notification to a lessee’s insurers with regards to potential loss(es) to the lessee’s applicable policies on which the insured is an additional insured. Policies, for example, can include lessee’s hull all risk and hull war as well as lessee’s excess war.

Insureds also should keep in mind:

  • There is time sensitivity with regards to any action that needs to be taken due to notices of cancellation (NOC) (7-day; 30-day) that are being issued by the market on a near daily basis.
  • The precautionary notification is a “marker” of a potential claim that could develop. Insurers are likely to understand the situation can change over time, and insureds can withdraw the notification in due course, if the exposure is fully mitigated.


Given the role of Russia in commercial launch activity and exploration, Marsh is tracking the sanctions list of Russian named insureds and Russian space insurers.

The level of impact on each placement differs on a case-by-case basis, so Marsh recommends that insureds contact their Marsh representative for details.

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Energy and power

Natural gas is considered to be much cleaner than many other energy sources. Consequently, European countries have become highly reliant on it as part of their energy transition. Significant volumes of gas are purchased from Russia.

The current conflict has exposed this over reliance and will result in changes to the energy strategy of several countries. There will likely be new asset construction projects focused on renewable energy, pipelines, and liquefied natural gas (LNG) terminals, as well as the reopening of decommissioned thermal facilities.

Countries switching from Russian gas, to say, US gas, are likely to experience a rise in energy costs, if only due to relative proximities. As a consequence of these increases, companies in those geographies could be exposed to significant shifts in values, increased business interruption and contingent business interruption risks, and supply chain problems.

Many countries, including the US and UK and regions such as the Middle East, Asia, and the Pacific are not reliant on Russia for oil or natural gas. However, the effect of European countries looking to purchase energy from alternate markets will increase the demand from the remaining non-Russian markets. Without a corresponding increase in supply, this is expected to increase energy prices.

A legacy of the present conflict is likely to be a surge in investment in renewable energy sources, although for major economies a large commitment will be required to make a difference. There will also be a significant lag between project planning and energy generation; it is unlikely that any projects announced now will produce energy for several years. In addition, there is the challenge of getting both the raw inputs as well as specialist consultants, contractors, and skilled labor to build and operate plants.

Marsh advises insureds to keep a “cool head” at present, not to base decisions on assumptions or to jump to conclusions, and to consider the impacts of inflation on their businesses.

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Supply chains

Russian ships have been banned from UK ports. The ban includes any vessels owned or operated by anyone connected to Russia and authorities will also gain new powers to detain Russian vessels. In the short-term, at least, it will be far from straightforward to work out which vessels are owned and operated by firms with Russian interests.

For ship owners transporting goods to Russia, technical problems are emerging. Ship owners’ insurers may now no longer be able to offer the normal guarantees that port owners often require in the instance of damage to ports by ships. Insurers may not be able to transfer payouts to ports, particularly if they are part state-owned, due to sanctions. This may lead to vessel arrests.

Shipping companies are also considering the long-term viability of their crews. Out of two million crew worldwide, approximately 200,000 are Russian and 75,000 are Ukrainian. Many Ukrainian crew are leaving to be with their families and to fight in Ukraine. As many of these crew members hold the rank of officer, with responsibilities for navigation and supervision of the safe operation of ships, their absence will prove challenging for the industry.

The conflict is leading to the displacement of ships into different parts of the world to avoid the conflict and transport alternative sources of commodities supplied by Russia and Ukraine. Unlike during the Ever Given blockage in 2021, supply chains are unlikely to be halted, but deliveries will be slowed.

In the longer term, a protracted conflict in Ukraine could have a profound effect on the commodity markets. As Russia and Ukraine produce 29% of the world’s wheat supply, 19% of corn, and 80% of sunflower oil exports, there is a potential for food stability issues for countries, including in Africa and the Middle East, which rely on imports of these commodities.

Furthermore, Ukraine supplies a large proportion of neon gas used in the production of semiconductors and is also a significant producer of uranium, titanium, iron ore, steel, nickel, copper, palladium, platinum, and vanadium.

Marsh recommends that insureds continue dialogue with their broker and trading partners, as the situation is fluid.

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Military strikes and street-level battles have caused significant damage to properties throughout Ukraine. Businesses with Ukraine operations may be looking at their property and political risk insurance policies to determine whether property damage or other losses may be covered.

However, property policies written since the beginning of the 20th century typically contain a “war exclusion” that will exclude coverage for losses arising from acts of “war”. Underwriters are likely to use that exclusion to decline claims linked to the Russian invasion.

Companies that sustain a loss to a property in Russia or Ukraine should still notify the appropriate underwriters, working together with their broker, to ensure the claim is reported in a timely manner.

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Financial institutions

The current conflict between Ukraine and Russia presents challenges to financial institutions around the world that operate globally and may be exposed to customers and suppliers who are, or will become, subject to sanctions.

From an insurance perspective, it is important for financial institutions to consider the below issues.


While financial institutions should have control and governance in place to deal with sanctions, the Russia-Ukraine crisis has escalated quickly and forced governments around the world to implement far-reaching sanctions within a matter of days.

This rapidly changing regulatory environment requires robust and agile monitoring systems and the ability for financial institutions to react quickly. The failure to ensure business processes and controls are adequately responding to new and expanded sanctions may lead to regulatory actions against financial intuitions and their directors and officers.

For this reason, it is important to ensure that directors’ and officers’ (D&O) coverage is broad enough to protect individual insureds.

Physical assets

Financial institutions that have physical investments in Ukraine are facing potential destruction of these buildings, shopping malls, and other tangible investments. Without appropriate insurance, they may face claims from investors who suffer monetary losses from their damaged investments, unless the rebuild costs will be borne by governments. Marsh recommends that financial institutions that have branches in Ukraine have a strong contingency plan for cash, valuable metal, and premises.

Financial institutions that have investment in real property in Russia are facing potential loss of access to these properties, not only due to Western sanctions, but also retaliation by the Russian government. This could lead to claims by investors unless the financial institution has political risk coverage.

Financial distress

Shocks to share prices, impacts from foreign exchange volatility, and a potential rise in funding costs could lead to potential changes to risk and investment appetite. There could also be a rise in bankruptcies of financial institutions that are over exposed on their loan book to Ukrainian and Russian companies. Additionally, cyberattacks are a major concern for financial institutions. In the short-term, Marsh advises insureds to contact their Marsh representative regarding any insurance cover where the alignment of the insurance and risk could be impacted by events in Russia and the Ukraine.

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Environmental, social, and governance (ESG)

The conflict in Ukraine has compelled leaders to re-examine pillars of the World Energy Council’s “energy trilemma index” — energy security, equity, and sustainability — on which countries’ energy and climate policies are ranked annually.

Italy is considering expanding its coal footprint, while Germany is contemplating running coal and nuclear plants for longer than planned and expanding investment in renewable energy. Other governments are likely to take similar actions, as they look to bolster their energy security.

There is potential for a short-term spike in carbon emissions as a result of these shifts. However, in Europe, it may be greater energy security is achieved in a sustainable way, accelerating the transition to a more resilient energy infrastructure and decarbonized future.

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Key actions to consider

If your assets or operations are affected by the Russia-Ukraine conflict, it is important to work with your broker or insurance advisor to carefully review your insurance policies and determine whether any potential losses may be covered. It is also critical to report any losses to your underwriter in a timely fashion.

Any business with suppliers, customers, or staff in Russia will need to consider the potential effect of sanctions on their business, and they are advised to seek legal advice as to any impact the bans may have. Companies are also advised to continue dialogue with trading partners and assess alternatives to traditional inputs and supplies from the region.

To learn more about your potential exposures to the Russia-Ukraine conflict and the risk management options available to you, please contact your Marsh advisor.

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