Russian-Ukrainian cyberwar to propel claims in global insurance markets

Additionally, litigation costs for insurance companies could also increase as policyholders may attempt to resolve denied cyber claims through litigation at an accelerated pace. (Credit: Oleksii/stock.adobe.com)

Since the start of the Russian invasion of Ukraine, a growing wave of cyberattacks has materialized, and DBRS Morningstar predicts that insurance companies in Europe and North America will see a corresponding increase in claims costs and disputes.

Although acts of war are generally excluded from cyber policies, according to DBRS Morningstar, the current situation will make it difficult to attribute attacks to specific actors because insurers will have to show that the attack and the claim are not related to a sponsored attack. by the state or carried out by a group acting as an agent of a government. Morningstar noted that cyber warfare is generally not recognized by state actors.

Moreover, even in cases where state actors are strongly suspected, courts could still rule in favor of an insured if the language of the existing policy is subject to interpretation, according to the credit rating agency.

In addition, litigation costs for insurance companies could also increase as policyholders may attempt to resolve denied claims through litigation at an accelerated pace.

However, “given the increasing sophistication of cyber insurance underwriting, shrinking limits and capacity, and the relatively low participation of cyber insurance products in overall portfolios, losses from cyber claims are expected to remain manageable for our rated insurers and reinsurers”, according to the rating agency. .

“Nevertheless, we expect insurers and reinsurers to continue to clarify their cyberwarfare exclusions to address the new realities of state-sponsored cyberattacks,” said Marcos Alvarez, senior vice president and head of insurance. at DBRS Morningstar.

Russia and Ukraine bottom out on AM Best Country Risk Index

AM Best has upgraded Russia to Country Risk Level Five (CRT-5), indicating that the country has very high levels of economic, political and financial risk.

In a press release, AM Best concluded: “Sanctions against Russia have targeted the financial system, resulting in a deeply challenging and unpredictable operating environment for insurers. Volatility in capital and foreign exchange markets increased liquidity risks. Additionally, capital controls and the impact of sanctions will negatively impact cross-border payments.

Similarly, Ukraine now has a CRT-5 designation, according to AM Best, who predicted a deep recession in the Eastern European country due to falling spending and consumer confidence as well as deterioration in trading conditions. Massive infrastructure damage will also slow economic recovery, while currency depreciation will lead to inflationary pressures.

Countries with a CRT-5 designation present insurance companies with the greatest risks to financial stability, soundness and performance.

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