International wars make their impact felt in the global insurance industry, as in many areas. The increase in risk factors in the field of insurance is reflected in a significant increase in premiums.
Murat Çiftçi, CEO of IBS Insurance and Reinsurance Brokerage, stated that the geopolitical risks posed by the Russia-Ukraine and Israel-Palestine wars had a deep impact on the insurance industry and said, “Geopolitical tensions and armed conflicts increased the uncertainty in the insurance market and increased capital costs. “According to AM Best, the global reinsurance industry had to increase prices to cope with these uncertainties,” he said.
Çiftçi said, “After the Russia-Ukraine war, 20-30% increases in insurance premiums were observed. These increases were especially evident in aviation and maritime insurance. Although the regional effects of the Israeli-Palestinian conflict remained limited, it created an additional burden on global reinsurance markets.
Insurance companies had to charge higher premiums to cover war risks. The wars even led some insurance companies to withdraw from the market as political risks increased. Insurers, especially those operating in war zones, withdrew due to operational risks. It is estimated that there will be a 5-10% decrease in the global insurance market in 2023. “Many large Western insurance companies had to withdraw from the market, especially due to sanctions against Russia,” he said.
Increasing risks brought higher premiums
Stating that wars slowed down the growth rate in the sector but also offered new opportunities in certain areas, Çiftçi said: “Geopolitical uncertainties allowed insurance companies to develop new products. Insurance demands, especially for cyber security, political violence and war risks, have increased. In the long term, these areas are expected to be growth engines in the insurance industry. There were premium increases in aviation, maritime, energy and cyber insurance due to war-related risks.
The most demanded insurance products were especially war risks, political violence, terrorism and transportation insurance. For example, aviation insurance companies have experienced large premium increases due to the loss of aircraft in war zones. The war environment paved the way for the development of innovative products such as abandoned assets and political risk insurance.
Abandoned property coverage, in particular, has become important for properties left in war zones that are not physically damaged. “Insurance companies have begun to offer new solutions to protect their customers against these risks with flexible policy structures.”
Source: www.dunya.com
