March 29, 2022

Ukraine Crisis: Will Political Risk Insurance Cover Losses?

Cutting business ties with Russia will cause financial losses – and in some cases, the amount involved can be staggering.  Companies will likely look for ways to recoup some of these losses, and this Reuters article notes that one source may be political risk insurance.  While standard insurance policies don’t cover extraordinary events like the fallout from Russia’s invasion of Ukraine, the article notes that $1 billion of political risk insurance was issued in 2020 alone for companies with Russian operations.

Unfortunately, having a political risk policy doesn’t mean that companies withdrawing from Russia will necessarily have a claim under it. This excerpt explains:

Companies that leave and abandon their business without any action taken by the Russia government to seize control of their assets will have a tough time collecting insurance, according to legal experts. “You see companies saying ‘we’re leaving because we support Ukraine.’ The question is then whether the policy covers a voluntary departure,” said Micah Skidmore of the law firm Haynes and Boone. Insurers are most likely to pay claims for revenues earned in Russian roubles that are no longer convertible to foreign currency, said legal experts.

The article says that additional actions by Russia that could support claims under political risk policies include asset seizures and nationalization of industries – all of which appear to be on the table.

John Jenkins