"Global Non-Life Insurers Expected to Pay Over 44 Trillion Won in Insurance Claims Related to Russia War"

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] As Russia's airstrikes on Ukraine continue for over two months, there is a forecast that the total insurance payouts global property and casualty insurers must make related to this could exceed 44 trillion won. It is analyzed that the payout amount will significantly increase as Russia detains aircraft leased from overseas.

On the 2nd, Japan's Nihon Keizai Shimbun reported that S&P Global estimated the insurance payouts by property and casualty insurers to range between $16 billion and $35 billion (approximately 20.2 trillion to 44.2 trillion won). Swiss Re, a global reinsurer, noted that last year payouts due to man-made disasters were $8 billion, but expects this figure to quadruple due to the Ukraine invasion.

According to the report, insurance payouts related to the Ukraine invasion mainly occur in specialized insurance sectors such as aviation insurance, cyber insurance, and political risk insurance. Of the total $35 billion in insurance payouts projected by S&P, about $15 billion is estimated to be aviation insurance claims. It is estimated that Russia has detained around 500 leased aircraft since the invasion of Ukraine.

In this context, aircraft leasing companies and insurers are engaged in disputes over insurance payouts. Bloomberg recently reported that leasing companies are demanding payouts considering the value of each aircraft to be between $15 million and $150 million. The world's largest lessor, AirCap, is claiming $3.5 billion in insurance for over 100 aircraft leased to Russian airlines.

Nihon Keizai Shimbun stated, "In the event of war, insurance contracts typically include a clause allowing insurers to cancel the contract seven days before the incident occurs," adding, "The issue is whether the incident date should be considered as February 24, when Russia invaded Ukraine, or March 14, when Russia enacted laws allowing aircraft seizure, which is currently under debate."

Insurers are invoking this clause to argue that they notified contract cancellations before March 14 and therefore are not liable for compensation, while leasing companies counter that after February 24, the risk of aircraft recovery became realistically impossible and thus insurance contracts cannot be terminated.

Besides aviation insurance, insurance payouts related to cyber insurance and political risk insurance?which covers defaults by foreign governments or state-owned enterprises?are estimated to reach $20 billion. Although cyber insurance policies include war exclusion clauses that do not cover attacks resulting from war, Nihon Keizai Shimbun reported that it is difficult to prove that the cyberattacks themselves originated from the war, making it hard to avoid insurance payouts.

This content was produced with the assistance of AI translation services.