There’s no doubt about it, the war in Ukraine has presented businesses and global economies with a set of truly unprecedented challenges.
As the first major armed conflict in Europe since the Yugoslav Wars and the fall of the Soviet Union in the EU-imposed sanctions and heavy pressure on businesses to cut ties with Russia have forced companies to adapt quickly to a fast-changing economic environment.
While the full extent of the economic damage caused by the war in Ukraine is yet to be revealed, we have already experienced a number of immediate effects on the insurance industry and wider global economy, which may help to shed some light on what the long-term effects could be.
Since Russia’s invasion of Ukraine began earlier this year, the EU have introduced a raft of sanctions to weaken the economic influence of Putin’s regime across the globe. Included in these measures is, for example, a ban on Russian cargo ships entering EU and US ports.
While such actions have historically been an effective way of influencing aggressors, they can also have a detrimental impact on the entire world economy, as businesses grapple with severe disruption to key supply chains.
We’re already seeing evidence of heavy economic turbulence in Europe, with Eurostat recently estimating inflation to be at 8.1% across the continent in May, up from 7.4% in April. Individually, countries neighboring Russia have been hardest hit by inflation, with Estonia having the highest level in Europe (20.1%), closely followed by Lithuania (18.5%) and Latvia (16.4%). The conflict has also been a catalyst for soaring energy prices across the continent, which were up by 40% in March, compared to last year.
Impact on the insurance industry
The impact of the war in Ukraine has been felt by all global business sectors, with some of the biggest consumer brands, such as McDonald’s and Starbucks, withdrawing from Russia completely.
Much less discussed, however, is the impact of the conflict on the insurance industry, where brokers and insurers have had to act quickly to support the needs of their clients, as they look to limit long-term damage to their businesses.
One of the most notable indirect impacts we’re seeing as an industry is the growing influence of Risk Managers at board level in companies. The latest member survey by the Federation of European Risk Management Associations (FERMA) for example, showed that 91% of European Risk Managers are now involved in forming their company’s corporate strategy, compared to only 55% in 2020.
While the COVID-19 pandemic was also crucial in driving this trend, the collective realisation that companies must plan ahead for the unexpected means that they will be increasingly reliant on protection from insurers going forward.
As an international professional services company, offering claims management solutions to clients across Europe, one of the major considerations faced by Van Ameyde is ensuring that any new clients we begin working with are not involved with or funded by Putin’s Russia. This is especially important for Van Ameyde Krogius, a company offering marine surveying and consultancy services in Nordics and Baltics, given that offices in Estonia, Lithuania and Latvia will continue to be a key focus, as much for us as for the wider industry in the future.
Since the conflict began, we’ve also seen an increase in claims from businesses whose supply chains have been badly hit by the ban on Russian imports and exports. It will take time for these companies to adapt to the new rules and is likely to cost them a significant amount of money in the process.
As the true economic impact of the war in Ukraine becomes clearer and businesses begin to adapt their operations accordingly, the insurance industry will need to offer the flexibility, protection and support required to help them overcome the further challenges ahead.
Similarly, we will continue to see risk planning grow among our corporate clients, as they look to better prepare themselves for the unexpected in the future.