War in Ukraine – impact on insurance

In the event of war, insurance contracts generally continue to run until their natural expiry date, but coverage must be considered to be very limited, as losses directly or indirectly related to war events are excluded in almost all lines of business.

The war in Ukraine, which has been raging since February 24th, and the response of the Western world in the form of economic sanctions against Russia have so far had a drastic impact on the insurance industry. Insurance brokers who deal with risks located in Ukraine and Russia and whose clients include Russian legal entities or natural persons are therefore obliged to deal with these effects.

Insurance of risks in Ukraine

According to the insurance definition, the entire territory of Ukraine is to be classified as a war zone, and strict sanctions also apply to the territories of Crimea, Luhansk and Donetsk.

In the event of war, insurance contracts generally continue to run until their natural expiry date, but coverage must be considered to be very limited, as losses directly or indirectly related to war events are excluded in almost all lines of business. A grey area also arises in the case of losses that remain still covered, as obligations as a prerequisite for payment by the insurer cannot possibly be met. This will have to be assessed on a case-by-case basis.

Insurance companies outside Ukraine are not prepared to renew insurance contracts or write new business in view of the war situation and the associated imponderables for contract performance. Insurance companies based in Ukraine are currently operating in emergency mode and can only provide a very limited service. It must therefore be assumed that there will be great difficulties in providing proper insurance cover in Ukraine.

Insurance of risks in Russia

Russia itself is not a war zone, existing coverages and contracts are therefore in principle fully valid. However, Russia is affected by sanctions imposed by the UN, the EU, the USA and Great Britain, which include a ban on insurance services for certain persons, companies and entities as well as certain goods and productions (sectoral sanctions). These sanctions must be complied with by all citizens of the respective issuing states or communities of states under personal threat of punishment.

While it cannot be the task of the insurance broker to advise his clients on the sanctions associated with the delivery of goods or financial transactions, it is part of his service commitment to provide information on possibilities for insuring risks, insofar as these are legally permissible in the light of the sanctions, and to take appropriate measures to obtain insurance cover.

In addition to the sanctions briefly mentioned here, all Western insurers and reinsurers have now decided not to offer any new capacity to Russian insurers. The Russian Federation reacted to this at the beginning of this week and, for its part, has banned Russian insurers from cooperating with foreign partners – i.e. insurers and insurance brokers – from “unfriendly countries”, including all EU members, until the end of this year. Thus, Russia is isolated from the international insurance market. The major international insurance brokers have subsequently withdrawn from Russia, and insurers with subsidiaries in Russia will most likely follow.

If the interests of EU-domiciled clients in Russia now require insurance cover, the only recommended course of action is for the respective company representatives to contact a Russian insurance broker on site, who can then obtain the required cover. This is because from an EU perspective, insurance brokers, as well as other companies, are not allowed to contact most Russian insurers because they are on the sanctions list as described above. On the other hand, the Russian insurance market consists of several professional insurers, which are now backed by the Russian state reinsurance company, so that common insurance coverage seems to be available. However, it should be borne in mind that insurance is only possible in rubles, lower sums insured than those needed could only be obtained and the financial strength of these insurers will also suffer in the future as a result of the sanctions.

It is currently still being examined whether capacities for Austrian interests in Ukraine and Russia are available from Austrian or Western insurers within the concept of balance sheet protection (so-called FINC clause); expectations must be classified, however, as rather limited for the time being.

Insurance of Russian interests within the European Union, the UK and the US

The sanction regime outlined above also requires the verification of Russian interests in Western states. The media have already reported confiscations of the property of oligarchs on the Mediterranean or in Great Britain. In this sense, the provision of insurance in the EU, the United Kingdom and the United States to sanctioned persons or entities is also prohibited. If sanctioned persons are found in an existing portfolio, the insurance broker must also withdraw from these persons or entities and terminate the business relationship, preferably in consultation with the insurance companies concerned. In case of doubt, institutions such as the Chambers of Commerce or the Ministry dealing with the sanction regime provide information on whether a person or company or entity is subject to sanctions. However, it is expected that a preliminary check will be made by the broker using the published sanctions lists.


Although the scope of economic ties with Belarus may be significantly smaller than that of relations with Russia, it can be assumed that, on the one hand, the sanctions will increasingly be applied to this country as well and, on the other hand, the Western insurance industry will completely withdraw from cooperation with local insurers.

Please note that all information is based on the current state of developments in this military conflict and changes may occur at any time.

Related Insights

Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229

Current status of sanctions against Russia and certain Ukrainian territories

EU sanctions prohibit any direct or indirect economic interactions (prohibition of payment and provision of services) with listed persons, as well as with all companies in which a listed legal entity or natural person has an ownership interest of 50% or more.

This is an overview of the current status of EU measures, with more focus on sanctions relevant to the financial sector/insurance (mediation) services. The summary includes the sanctions imposed in 2014 against Russia and Crimea, which are still in effect, and the sanctions most recently imposed in February of 2022 which are again in addition to the sanctions in place and targeted towards Russia and the occupied Donetsk and Luhansk regions.

For more detailed information on particular clients, corporate entities or private individuals you can contact Nathan Pinhasov from GrECo Group Legal, n.pinhasov@greco.services, or Andreas Krebs from GrECo Group Insurance Mediation Services, a.krebs@greco.services.

Sanctions against private individuals

IEU sanctions prohibit any direct or indirect economic interactions (prohibition of payment and provision of services) with listed persons, as well as with all companies in which a listed legal entity or natural person has an ownership interest of 50% or more.

In addition, this applies to companies controlled directly or indirectly by sanctioned persons or to those where these persons may exercise a dominant influence.

The list of persons against whom financial actions apply was extended several times by Executive Order 2022/260 (listing 21 natural persons, two banks and one company) and Executive Order 2022/261 (listing 335 Duma deputies) of 23. February 2022, as well as on February 25 with Decree 2022/332, against 99 additional natural persons, including No. 670 Russian Foreign Minister Sergey Lavrov as well as No. 699 Russian President Vladimir Putin.

The following activities are examples of EU’s prohibition on payment and provision of services:

  • Transfers of funds
  • Sale of goods
  • Provision of services
  • Management of assets
  • Provision of other economic resources, e.g.: Cash, checks, monetary claims, Deposits with financial institutions, Publicly and privately traded securities and debt instruments including: Stocks and shares, Interest, dividends, or other income, Loans, guarantees, Bank guarantees, Documents containing indicia of participation in funds, etc.

Sanctions against Legal Entities

In addition to natural persons, selected legal entities have also been sanctioned by the EU. These sanctions – analogous to the sanctions for natural persons – prohibit direct or indirect economic interaction in the form of a prohibition on payment and provision of services (see non exhaustive list above). The assets of the listed legal entities in the EU will be frozen.

  • Several Russian banks are excluded from the international payment system SWIFT. All those already sanctioned in the past are affected by said SWIFT exclusion. Further financial institutions and banks could be excluded from SWIFT.
  • Ban on transactions with and freezing of the Russian Central Bank’s assets within the EU and G7 countries, no more transactions possible within the EU.
  • European airspace ban on Russian aircraft.
  • Media companies such as Sputnik, Russia Today and their subsidiaries are restricted in their activities in the EU.
  • Sanctions against Belarus: EU import ban on Belarusian products such as minerals fuels, tobacco, wood, cement, iron and steel, and personal sanctions.

Sectoral Sanctions

  • Military goods embargo: The direct/indirect export, supply, sale of military equipment and other defense material to Russia is prohibited. Also prohibited are technical assistance and brokering services, as well as financing the supply.
  • Export ban for dual use goods: Prohibited direct/indirect supply/export/sale of listed dual use items (Annex I of Dual Use Regulation 2022/328), irrespective of their civilian or military use, with or without origin in the Union. Dual use goods are designed or suitable for both civilian and military purposes.
  • Prohibition of payment, provision of services and direct/indirect supply/export/sale of goods and technology different from listed dual use items: General electronics, computers/electronic assemblies, telecommunications and information security, sensors and lasers, navigation and avionics, marine and aeronautical, and space and propulsion equipment therefor with technical performance capabilities different from listed dual use items.
  • Export ban on certain oil equipment goods: The indirect/direct supply/export/sale of goods and technology, whether originating in the Union or not, which can be used for oil refining, directly or indirectly to or for use in Russia shall be prohibited. The prohibition also applies to technical assistance, brokering services, and financing or financial assistance related thereto, whether directly or indirectly.
  • Export ban on aircraft and spacecraft, parts thereof, and technical and financial assistance and (re)insurance related thereto.
  • Extensive Restrictions of the EU capital market: For instance, the exclusion of certain Russian banks and military and oil industry companies from EU capital market.

In addition to the previous prohibitions on buying, selling, brokering, providing investment services or ancillary services, directly or indirectly, transferable securities and money market instruments with a maturity of more than 30 days from Russian banks listed in Annex III to Regulation 833/2014 (SBER Bank, VTB Bank, VEB Bank, GAZPROM Bank, ROSSELKHOZ Bank), on or after 12 April 2022, also applicable to Alfa Bank, Bank Otkritie, Bank Rossiya and Promsvyazbank), as well as for Russian companies in the military and oil industries (Almaz-Antey Kamaz Sea Trading Port, Novorossiysk Rostec, Russian Railways, JSC PO Sevmash Sovcomflot and United Shipbuilding Corporation).

Regional Sanctions in Ukraine

Sanctions in relation to Crimea and Sevastopol
Import ban on goods originating in Crimea or Sevastopol effective from June 2014: the EU prohibits the import of all goods originating in Crimea or Sevastopol and financing and insurance/reinsurance related to them.

As of December 20, 2014, further prohibition applies on export of certain goods and technology listed in Regulation 692/2014 Annex II to natural or legal persons, entities or bodies in Crimea or Sevastopol or for use therein. Similarly, the sale, supply, transfer of these goods and related direct or indirect technical assistance, brokering services, financing are prohibited.

Sanctions against the Donetsk and Luhansk regions and in response to the deployment of Russian forces to the regions

Further questions?
The CC Credit Team will be happy to answer any specific questions you may have about your trade credit insurance contract. Please contact us directly.

  • Ban on Import: The import of goods originating in the Donetsk and Luhansk regions not controlled by the Ukrainian government is prohibited as of February 24, 2022. It is also prohibited to provide, directly or indirectly, financing or financial assistance, as well as insurance and reinsurance, for the import of these goods. The prohibition does not apply to goods originating in these territories, if the goods are provided to and have been inspected by the Ukrainian authorities and a certificate of origin has been issued by the Ukrainian government.
  • Ban on new investments: Prohibited from acquiring real estate, facilities, securities of a participating nature, or shares in the foregoing, or expanding existing investments thereof. Prohibited from providing financing to entities, establishing joint ventures with entities, and providing investment services thereto in the non-Government-controlled Donetsk and Luhansk Oblasts.
  • Export ban on goods in the fields of transport, telecommunications, energy, prospecting, exploration and extraction of oil, gas and mineral resources
  • Prohibition on provision of technical assistance or intermediary services, construction or engineering services for infrastructure: The competent national authorities (in Austria: BMEIA) may, by way of derogation from the above prohibitions on new investment, export of goods and provision of technical and financial assistance, make exceptions for humanitarian reasons or to ensure the security of existing infrastructure.
  • Tourism activities: Prohibition on providing services directly related to tourism activities in the occupied Donetsk and Luhansk regions.

Please note that this information has been compiled based on the sanction regime valid from week 09, 2022, and that there may be amendments at any time when the crisis worsens. We will keep you updated on further developments.

Related Insights

Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229

Property damage caused by war on land – aspects regarding insurance cover

It is a principle of insurance that due to the potential accumulation of claims there is a general exclusion of damage caused to a risk (buildings, factories, their technical equipment, installations, stocks and other contents) in connection with war and civil war.

In this information and in oncoming postings we will focus on the question what actions of war as we see them currently in Ukraine mean for the existence of insurance coverage and for payments of damages by the insurer. We start with the most important part, considering the values involved, property insurance and property business interruption (BI).

Exclusion and termination of cover

It is a principle of insurance that due to the potential accumulation of claims there is a general exclusion of damage caused to a risk (buildings, factories, their technical equipment, installations, stocks and other contents) in connection with war and civil war. The standard definition of this exclusion is “exclusion of damage caused as direct or indirect consequence of any kind of military action, with or without declaration of war, and all violent actions by states; further caused by civil commotion, uproar, rebellion, revolution, civil war including all military or police or other state measures in connection therewith.”

Standard European insurance wordings do not automatically terminate insurance contracts if the situation described by the exclusion quoted occurs. Quite on the contrary, they state clearly that cover remains in existence, but the insured has to prove that a fire occurred during war time does not have its origin in war or any military action.
There are insurance contracts, however, that terminate cover at the outbreak of war, so it is important to have a look in the standard or written wordings applicable to each individual insurance contract.

Most reinsurance treaties still have the World War clause, saying that the treaty ends in the case of a war between the nations United States, Russia, United Kingdom, France and China. So, the extension of the current conflict into a war between Russia and NATO would most probably trigger this clause. But we are not there, and we can only hope that we never will.

Grey area sabotage, arson and terrorism

War and warlike action, the breakdown of public order may lead to loss events, like damage due to sabotage, arson committed by persons inside and outside a company, acts of terrorism. Here we enter a certain grey area, as far as insurance coverage is concerned. Each claim will obviously be analyzed very carefully whether it is a case of indirect consequence of the war, as defined above, or whether the property damage occurred independently from the conflict situation.

Another point to be considered is that the insured must in fact own the premises insured at the time when the loss occurs. Any change in this ownership, such as seizure or requisition – not insured in property insurance, as this is a political risk – but also abandonment of or being chased from premises will most probably suspend coverage. If the ownership is still existing as a title, but no employees are left on the premises, this means that the control of the risk has been given up and the usual obligations of the insured cannot be fulfilled any longer, which causes serious doubts regarding the validity of cover.

Non-Property Damage Business Interruption

These principles in respect of property insurance apply equally to business interruption. Even if a Non-Property Damage Business Interruption endorsement has been agreed, this follows the basic and general conditions of BI. So, in the case of an enterprise standstill due to the lack of energy supply, cut of ways of communication, disruption of the supply chain, lack of workforce etc. there will always be an evaluation whether these events are due to a situation of war or not.

Although the margin for negotiation is rather small for a broker in this context, GrECo will do the same as in every other loss event, that is to support the interests of our clients in order to reach a fair and just evaluation of the insured’s claim and to obtain wherever possible a correct loss payment from the insurers.

Related Insights

Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229

GrECo Group Task Force Ukraine conflict – statement on sanctions and insurance

The conflict between Russia and Ukraine and the threat of heavy sanctions to be imposed by the Western world as consequence of Russian military action, have brought the topic of financial sanctions and the position of insurance again into the focus of consideration.

In view of the rapid developments in the conflict between Russia and Ukraine and military action started on Ukraine territory, GrECo Holding has set up a Task Force responsible for gathering all information on the current crisis and for reactions in all fields of our activities. Starting with today, we will provide information on all topics and developments linked with the situation on our website for the information of clients and partners. In this we will be supported by our colleagues in the countries concerned and information will also be based on statements obtained from insurers and reinsurers.

We are starting this reporting with the sanction topics. The next news will refer to what war and civil war mean to insurance contracts and coverages.

For all further information on sanctions please contact GrECo Group Legal, Nathan Pinhasov, n.pinhasov@greco.services For any information and questions regarding insurance matters please approach GrECo Group Insurance Mediation Services, Andreas Krebs, a.krebs@greco.services

International sanctions and insurance – general principles

The conflict between Russia and Ukraine and the threat of heavy sanctions to be imposed by the Western world as consequence of Russian military action, have brought the topic of financial sanctions and the position of insurance again into the focus of consideration. After sanctions imposed e.g. on Iran in 2012 or Russia in 2014 after the Crimea invasion, a lot of experience with this political instrument has been obtained and clarifications have been made, not at least by the European Union. It is important, therefore, to take another look onto this matter.

Sanctions by the EU

The European Union sees sanctions as a tool to prevent conflicts and to respond to crises, the intention being “to bring about a change in policy or activity by targeting non-EU countries, as well as entities and individuals, responsible for the malign behavior at stake.” Most of the sanctions are in accordance with United Nations resolutions and are also agreed with the United States and the United Kingdom.

Some of the sanctions are published as Guidance notes to the governments of the Member States, but in some severe cases they are issued as Regulation, thus coming into force immediately in all Member States and prohibiting trade or financial transactions with states or persons against which the sanctions are directed. It is forbidden to each EU citizen, company or institution to violate this regulation by any way, and normally the decision is enforced by high penalties.

Although this kind of sanction does not only prevent the conclusion of new contracts it also interferes with existing contracts and, especially important for insurance contracts, prevents for instance the payment of claims. This situation is reflected by exclusions in insurance contracts with the effect that coverage is terminated once the sanction becomes valid. As it is forbidden to insurers, reinsurers and brokers alike to neglect or circumvent this exclusion – for instance by trying to place a contract affected by the sanction in a market where the sanctions do not apply – it is really fundamental, to be compared only with the War or Nuclear exclusions.

Sanctions by Third countries

More difficult and complex is this issue, if the sanction is pronounced by a state outside the EU. There can be bilateral or multilateral sanctions between two or more states. Starting with Cuba, the United States have become very active in putting other states under sanctions. They do this with the same consequences as described for the EU: creation of a Federal Law with effect on all citizens and companies living or having their headquarters or having only assets as foreign owners (companies, capital, licenses and other titles) in the United States. They all risk penalties, seizing or freezing of capital etc., when acting contrary to the sanction act.

For this reason, all reinsurers and most internationally acting insurers have integrated the Sanction exclusion clause into their contracts with the same effect as described for EU sanctions above. This means that, even if an insurance contract has not anything to do with US legislation, cover will be excluded. It is true that the EU reacted on this with a so-called blocking statute, saying that “the extra-territorial application of laws adopted by third countries will not be recognized by the Union”. This has led to European insurers associations issuing own clauses, like in Austria, where it is stipulated that “exclusion from cover is valid if based on sanctions by the US or other third countries, if they are not against European or local law”.

Economic reality and fear of reprisals mean that globally acting reinsurers and insurers will obey US sanctions despite the political attitude of the EU or any Member State. But at least there is the possibility to look for insurance markets not intimidated by US law who may grant cover.

Scope of sanctions

Originally, sanctions were imposed on whole countries, since it was difficult or impossible to separate government interests from that of economic entities of the country concerned (e.g. Cuba, North Korea, Libya). Nowadays, (financial) sanctions have become more sophisticated and detailed. They are directed against persons with political, military or economic functions in that state, against certain industries, institutions and firms. This has led to establishing sanction lists to be checked in the moment when a business relationship is intended or when delivery of goods or financial transactions have to be prepared. For EU sanctions, a Sanction map (Sanctionsmap) has been installed, which is openly accessible, and most states have their own sanction lists to be consulted.


The embargo is the older parent of the financial sanction, having its roots in sea blockades of long times past. It means the prohibition of trade and transport of certain goods to given destinations. Most common are arms embargoes, but they can be extended to all kinds of goods, in most cases still to those that might be used for weapon production or directly for military use. Goods falling under an embargo ruling cannot be insured. Any circumvention by false declaration of the nature of goods or by sending them to third countries that forward the goods to the sanctioned destination will be prosecuted and providing of insurance may be considered as a criminal act. Therefore, insurers will have a close look on shipments, export declarations and the like.

Exemption to sanctions for humanitarian reasons

As we have seen, sanctions disrupt the insurance cover since no further financial transaction is possible. This affects, for instance, construction or erection projects in the country concerned or the operation of a local factory, especially in the case that the sanction is extended to the whole country. If a loss happens where it is necessary and even urgent to send money or relief goods to persons affected by the loss event (accidents of employees, fire, natural catastrophes), the humanitarian aspect may come into consideration. The EU has made clear that it is prepared to make exemptions to sanctions for humanitarian reasons, since the population of a country shall not be punished when its government is under sanction for the afore-mentioned malign behavior. In such cases, applications can be made to the relevant authorities with the aim to allow financial transactions for specific situations.

The role of GrECo as insurance broker and consultant

As this whole sanction topic is a very complex one, GrECo sees its role as insurance broker in the information of all clients with respect to insurance implications, under which circumstances cover can be obtained for countries or industrial sectors where sanctions have been imposed, what consequences there are for running contracts where the cover is stopped due to sanctions, which margin there exists discussing the cover with insurers. By no way, the broker may be ordered to assist in the circumvention of sanctions or embargoes.

In the insurance industry, sanctions have become part of compliance regulations and codes of business conduct. Insurers will, therefore, have a close look on the business offered to them with respect to sanctions, and – in international insurance – on the question where the business comes from, out of which country, who is the insurance buyer, who the insured. Major insurers are aware of the many individual aspects that sanctions may have, and they are prepared to make their decisions according to the situation in each single case.

GrECo will closely monitor all sanctions now imposed by the European Union, the United Nations, the United States and the United Kingdom on Russia in order to be prepared to give thorough advice on the consequences on insurance and insurance payment transactions in this new situation.
We will post further news on sanctions on Russia, once the full scope of them and their implications will be known.

Related Insights

Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229

Insurance Market Update Central Eastern Europe (CEE)

Europe coming together – also in insurance

Like in other economic areas, differences between the Eastern European countries and the rest of Europe are also disappearing in insurance. CEE states have travelled a long way after the fall of the Iron Curtain: they started at a very low point of insurance volume, but insurance penetration has steadily been growing, “Western” insurance practices and legislations have been introduced very fast. Today the CEE insurance market consists of both subsidiaries of international groups and strong local companies.

Whereas at the beginning there was only motor insurance and industrial insurance in the focus, the population can by now afford better insurance for their property as well as life insurance. Only liability insurance remains behind, as the jurisdiction is still not at the high level of protecting the interests of claimants like in the rest of Europe.
For this reason, the change in underwriting behaviour we are currently facing is somehow smoother on the CEE markets, but the general strategy of international groups and business exchange with reinsurance will lead to similar situations like in other highly developed markets.
For the most recent developments on the CEE insurance markets we have picked Poland, Czech Republic and Russia as a model for other markets.


In 2020 the Polish insurance market achieved a premium volume of 20.7 bn PZN (4.6 bn EUR) in Life insurance and 40.7 bn PZN (9 bn EUR) in Non-Life. Insurance penetration stands at 3.7 %, thus reflecting the country’s overall picture as one of the well-advanced economies among the Eastern countries. There is a typical consolidation tendency on the insurance market, as shown by the recent sales between international groups: Nationale Nederlanden bought MetLife, Allianz took over Aviva and Uniqa purchased Axa. Despite these changes, most European insurance groups are active in Poland, contributing largely to the capacity of the market along with major Polish insurer PZU. For overall market figures see:www.piu.org.pl

For many years, Poland has been a rather low-premium market due to high competition and relatively good results in most lines of business. This has changed by now in industrial insurance, where international standards and practices are more and more adopted. So, we have seen the same tendencies like in Western Europe at the last renewal and are expecting them for the renewal(s) to come:

  • more underwriting information required in order to support a policy of selective underwriting, but still no withdrawal from certain branches or occupations;
  • increase of deductibles;
  • price increase in PDBI and Cyber of 10 % – 20 %, and of 20 % – 30 % in D&O, thus more moderate than in other countries.
  • CAR insurance is well developing due to the booming construction industry in the country, but bad loss experience in civil engineering for roads, hydrotechnical plants and tunnelling is leading to a reduction of market capacity, available only at higher price.

One of the great changes the Polish economy will have to face is the transformation from coal as the country’s most important energy source, to other, “green”, sources. Although this will take some time, opportunities for innovation of both the technical bases and insurance solutions will positively influence the insurance market.
Still, one of the main concerns of the insurers is to obtain higher market shares, which leads on the one hand to product innovation and product enrichment in life insurance and to a wild price war on the other.

Czech Republic

The Non-life insurance premium of this traditional industrial nation amounted in 2020 to 94.7 bn CZK (3.6 bn EUR) and the Life insurance premium reached 46.5 bn CZK (1.8 bn EUR). This results in a good average insurance penetration of 3.2 %. Market shares of the insurers working in the country remain stable. After the integration of former state-owned market leader Ceska pojistovna into Generali a short time ago, the market is dominated by the big European insurance groups. Generali will also reach out to integrate their company in neighbouring Slovakia into Generali CZ, thus again creating one market for both countries.
The insurance market has gone well through the Covid-19 pandemic, as the peril was excluded from all wordings except travel insurance. It seems that the market will become interesting for MGAs working with the capacity of German and British insurers. The year 2020 was relatively good for the insurance market with the same claims experience like in the previous year.

  • The general underwriting policy remains unchanged except for some insurance lines like D&O, cyber and similar financial lines, where local carriers follow the approach of the international markets, reducing the capacities and increasing the price by 10 – 20 %.
  • In industrial insurance, pricing remains stable and is rather competitive.
  • There is also a strong tendency to increase prices in motor insurance for all clients with a long-term loss ratio above 60 %. There is a high stability in the scope of coverage provided, with no signs of restrictions.


The Russian insurance market consists of 229 market players (154 Insurers, 57 Insurance brokers, 18 other insurance related companies), but their number is decreasing (e.g. minus 13 within one year) due to the consolidation between local insurance groups. Despite the enormous size of the nation, business is concentrated in Moscow, with 10 insurers collecting 70 % of the whole market’s premium of 865 bn RUB (10 bn EUR) in non-life and 430.5 bn RUB (4.9 bn EUR) in life insurance.

Supervision of the insurance market by the Central Bank of Russian Federation is quite effective, focusing on financial stability and good business standards, approaching the high levels valid in the European Union. After the restrictive measures by the state in connection with Covid-19 in 2020, the insurance industry is recovering and will reach a growth rate of 8 % in credit and life insurance and of at least 3 % in non-life insurance until the end of 2021.

There is still a soft market for property and casualty insurance, as well as employee benefits and the marine lines, but, like anywhere else, a hard market in financial lines such as D&O, Cyber and Crime. After price increases of 20 – 30 % in D&O in 2020, a further 5 – 10 % rise has been registered at this year’s renewal, all at rather limited capacities. If, in all lines, a major reinsurance share is needed due to the size of the risk, the strategy of the international carriers will influence local underwriting decisions, leading to the well-known price increase and other measures.

Related Insights

Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229

In the jungle of insurance taxes

An overview of taxes, levies and other charges for policyholders in CEE countries.

The possibility of companies not receiving payment for their products sold or services performed always exists. Poor payment discipline, insolvency procedures, political risks, risks and prevention measures we faced in relation to COVID-19 pandemic are the ones which can jeopardize company’s financial security. In most jurisdictions around the world insurance premiums are subject to indirect taxation, such as VAT, Goods and Services Tax or a specific tax, such as insurance premium tax (IPT), stamp duty or other levies. Over the past few years and in line with a global trend of governments’ positions to take profit from bigger market turnovers, a growing number of countries have introduced or increased insurance premium tax and parafiscal charges.

In most of Eastern Europe, but definitely within the European Union member countries, insurance services are generally exempt from VAT, and most EU Member States have introduced a tax or levy on insurance premiums. The variety of taxes on insurance premiums can be a burden for insurers writing global multi-jurisdictional programmes, as they need to understand which taxes apply in countries where risks are located. Insurers often need to administer and pay taxes in those countries, and historically there has not always been a high level of compliance when it comes to “foreign” insurance taxes. Non-compliance is still an issue, and application of local taxes should be agreed with the insurer considering the size of each risk.

  • One of the major issues for the correct calculation of taxes in international programmes and for the tax payment in the state where the tax is due, lies in the principle applied by individual tax legislation. Most of these tax laws stipulate that the insurance tax is due in the country where the (property) risk is located, the company activity is deployed or where vehicles are registered (principle of risk location).
  • Some countries, like Germany, add to this basic principle the stipulation that the tax is due in their country, if the policyholder is a national citizen or company (principle of policyholder). The obvious conflict between the two principles may be solved by superseding EU regulation or by a double-taxation agreement. Each case must be examined individually.
  • The third principle that applies at least in EU countries is that insurance of international transports and credit risks is exempted from taxation. There are other special rules for the insurance of diplomats or travel insurances, but this would lead to far in this general survey.

With these considerations in mind, brokers are becoming more concerned about their obligation of correct advice giving in respect of foreign insurance taxes. Although in most cases the insurer will transfer the tax amount to the respective tax office abroad, the policyholder remains liable for the correct tax payment and is held directly responsible by the state that does not receive the tax in accordance with their legislation. It is the duty of the broker to check at least the correct tax calculation by the insurer.

Insurance Premium Taxes in Eastern Europe

In Eastern Europe, IPT is still in its early stages and the amounts collected remain relatively low, when compared to Western European standards. Among the territories that joined the EU in 2004, multiple countries have not yet introduced a Western European IPT regime. This is the case in Estonia, Latvia and Lithuania but also in the Czech Republic. Bulgaria is an example of low insurance premium taxation. Slovenia and Slovakia, in turn, have IPT rates closer to those applied in Western Europe and with a limited number of exemptions.

Hungary has introduced a so called IPT regime, but in fact it is based on an insurance levy to be paid directly by the insurer in accordance with the size and structure of his portfolio, following a sliding scale model. This means that the insurer must not put insurance tax on his premium invoice. Of course, he is allowed to consider the levy among his costs in the premium calculation.

The same levy principle applies in Romania or Poland, where insurers have to pay direct contributions to the state for various reasons but are not allowed to charge the policyholders directly. They will be hidden, however, in the overall premium calculation.

Looking at the non-EU countries in Eastern Europe, almost no IPT regimes can be observed. Serbia imposes a 5% insurance tax payable by the insured on all non-lifelines except health, accident and credit. In Ukraine, a levy calculated on gross written premiums (GWP) has to be paid by locally admitted insurers and reinsurers (excluding any inward reinsurance acceptances and without deduction of outward reinsurance remittances) and other contributions to funds have to be paid by insurers for almost all non-life lines.

Russia does not apply insurance premium taxes payable by policyholders. However, there are several levies to be paid by insurers from GWP into various reserve funds as well as a compensation fund run by the insurer associations to protect policyholders in the event of an insurer insolvency.

In Georgia, Armenia and Azerbaijan multiple levies on all non-life classes including inward reinsurance apply. In Azerbaijan the supervisory levy is collected on all classes of insurance.

In view of the various terms used for describing insurance taxes, levies, contributions, stamp duties etc., we recommend differentiating between:

  • Insurance taxes = always paid separately by the policyholder and shown clearly in the premium invoice
  • Additional taxes = also paid by the policyholder, apply to some lines of business only; e.g. fire brigade tax for policies insuring fire risks, motor insurance tax in connection with Motor TPL insurance
  • Levies and similar contributions to the state or to funds (also called parafiscal charges) = paid by the insurer and being part of his overall expenses

Increasing international discussions

While taxation, including insurance taxation, remains a largely sovereign matter, a number of prominent tax issues are increasingly being discussed at international or EU level. In recent years, for instance, policymakers have been seeking ways to ensure that companies pay their fair share of tax and avoid profit shifting to reduce their tax bills. Due to the cross-border nature of tax evasion and avoidance, this effort requires international cooperation. This development also touches the area of insurance premium tax and levies.

There are discussions on EU level to have insurance taxes replaced by ordinary VAT. This would mean that indirect insurance taxation becomes common use throughout the Union and associated partners, but the implementation will still take some time, as it is not considered to be a major issue to be solved.

Ensuring Compliance for GrECo clients

Giving advice on correct insurance taxation to clients is an integrated part of our service delivery. All GrECo employees have access to information material in this respect from international sources, selected local information and internal news. Under its compliance policy, the GrECo Group is continuously monitoring all developments in taxation in GrECo markets and offers evaluation of complex insurance taxation cases where a more thorough study of legal texts and practice is needed.

IPT in CEE (July 2021)

IPT in CEE (July 2021)

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Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229

Heavy storms, wildfires and a giant explosion – the catastrophes of 2020

Beside the Covid-19 pandemic event which is bound to cost insurers up to 80 billion US-Dollars, the usual Natural Catastrophes (NatCat) scenario was also present in 2020 and, triggered in many ways by climate change, caused an overall worldwide loss of 210 billion US-Dollars, of which 82 billion were insured (an increase of 40 % in relation to 2019). Events occurred on a global level, but worst hit last year was the Western hemisphere, particularly the United States.

After a few years of lesser activity there was an extraordinary hurricane season – the number of storms added up to 30 events, so in addition to traditional names starting with a letter of the Latin alphabet the Greek alphabet had to be used, the last storm being called Iota. The most severe storm, Laura, reached a speed of up to 240 km/h and flooded an enormous inland area in the state of Louisiana. The hurricanes caused a loss of 43 billion US-Dollars, of which 26 billion were insured. This high insurance share could regrettably not be seen in the Eastern hemisphere, where large-scale destructions by cyclones and floods in China and India remained almost uninsured. Both frequency and energy of these storms are attributed to the constant warming of the water surface of all oceans.

High temperatures even in the Arctic region and Siberia combined with long periods of drought lead to another wildfire scenario that was particularly high in the Western states of the US, like California and Oregon. Beside the huge loss of wooded areas, about 14,500 buildings and homes were destroyed in these two states alone. Weather conditions on the large plains of the American Midwest caused heavy thunderstorms and tornadoes, destroying several million hectares of corn and soybean crops.

In Europe, the NatCat experience remained relatively low last year. The worst events were again linked to climatic conditions – typical rainfall events at the end of the summer were extremely heavy on the Mediterranean coasts of France and Italy, the resulting floods destroyed hundreds of homes and traffic infrastructure, the overall loss makes up for most of the continent’s NatCat loss balance of 10.6 billion US-Dollars.

Europe was also the continent to be hit by two major earthquakes in one region, Northern Croatia near Zagreb, causing property damage of at least 2 billion US-Dollars.
All natural disasters claimed some 8,200 lives, the toll being particularly high in coastal areas and in the developing and emerging countries.

Due to the Corona pandemic and the restrictions on international travels, the number of man-made disasters, like aircraft crashes, ship disasters and terror attacks remained very low. There was one shocking event, however, the explosion of August 4th, that destroyed the port and a part of the city of Beirut, causing an economic loss estimated at 7.5 billion US-Dollars. The reason was the storage of large quantities of ammonium nitrate, a highly explosive chemical, over a long period without taking a minimum of precautionary measures.

(Sources: Munich Re, Swiss Re, Artemis)

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Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229

The pandemic in court

Does business interruption insurance pay for pandemic damage? The first rulings by European courts on the insurers’ obligation to cover these claims have been positive for the insured.

Business interruption insurance (BI) shall reimburse losses and expenses in the event of a total or partial standstill of the company after the occurrence of a property damage, e.g. after a fire. In recent years it has become internationally common to insure business interruption scenarios without any associated damage to property. A special form of this is the cover known in Austria as “Epidemics BI, which is offered specifically to the restaurant and hotel industries.

After the first lockdown, it was obvious that the affected companies would turn to their insurers for compensation from their BI contract. It turned out that in many cases the claim was refused. Of course, the insurers were just as surprised by the pandemic as all other branches of the economy and were not prepared for the expected claims. According to a specification of the European supervisory authority, each damage had to be handled in an open-minded manner, but the basis for compensation was to be checked according to the wording of the insurance conditions in the respective contract.

Insured versus insurer

Differences in the interpretation of these contractual terms ultimately led to claims before the courts. So far there have been a number of first-instance decisions that shed light on jurisdiction concerning the problems of interpreting insurance wordings. A supreme court ruling from Great Britain has also already been received.

What all the judgments have in common is that more importance is attached to the interpretations of the insured than to the arguments of the insurers regarding the pandemic situation. The following tendencies can be deduced from the judgments issued so far: basically, the BI contract must include damage not related to property damage. The insurance contract must not contain any exclusion of infectious or contagious diseases.

Tricky details

But in detail, the question will be whether the insurance contract is an all-risk cover or whether the insured risks are specifically listed. In the all-risk case, according to courts in Germany and France, cover is provided, unless there is an explicit exclusion of the pandemic. If diseases are explicitly listed, coverage is rightly rejected because Covid-19 did not even exist as a disease and could therefore not be mentioned in the conditions. The courts (e.g. Higher Regional Courts Essen and Hamm in Germany) admit that the insurer only wanted to insure the diseases listed. The situation is different when all diseases are basically covered and the list shows diseases as an example only – probably because of their rather frequent occurrence.

Epidemic or pandemic?

Furthermore, the question arises whether a pandemic is an epidemic if the insurance wording is based on epidemic laws. So far, the courts have not followed the insurers’ argument that a pandemic is an unmanageable risk due to its size and effects that they cannot bear. On the contrary: This would not be understood by the clients, since the damage was definitely caused by a disease or epidemic against which they insured themselves. There should also be no difference made between the Epidemic Act and the Covid 19 Measures Act, according to the Higher Regional Court Feldkirch, Austria.
In France, there was a discussion whether the pandemic is not automatically excluded in all those contracts that have an exclusion of “force majeure” and “orders and measures by authorities”. However, in previous epidemics such as H1N1 or dengue fever, French courts had already determined that it was not a matter of “force majeure”. Judgments on this aspect of Covid-19 are still pending.

Business shutdown or denial of access?

In the meantime, the definition of the term BI is also being discussed: Does the insured standstill of business activity require the company to be closed or is the denial of access imposed by authorities sufficient for cover? As in the Austrian epidemic BI, in which the occurrence of the epidemic in a company is decisive, other insurance contracts also require that the company concerned must be closed. In the majority of the BI wordings, the general prohibition of providing a service, for example as a restaurateur or hotelier, is, in the opinion of the courts, sufficient for cover being given by the insurer. Denial of access was recognized by courts in France, Great Britain and other countries as the cause of an insured standstill.

Then there was the rule in British and Irish insurance wordings that the epidemic must occur within a close radius of 25 miles (40 kilometers) from the affected company in order to have the claim paid by the insurer. Here, the courts recognized this condition to be automatically fulfilled by the pandemic.

Some of these issues have so far found their way to the Supreme Court via urgent proceedings in one country, the UK. The above arguments in favor of the insured were confirmed in a procedure initiated by the financial market supervisory authority to help 370,000 companies get their insurer to pay claims. The Supreme Court paid particular attention to an argument of the insurers, which read as follows: Even if the companies had remained open, no customers would have come due to the lockdown, so the damage would have occurred “anyway” ─ a classic exclusion. However, the Supreme Court overturned an earlier ruling which, after the hurricane disaster in New Orleans, had found the insurer to be right on this line of argument. This objection must therefore not play a role for the actual claims.

As last news before the editorial deadline, we received the message that the Austrian Supreme Court, contrary to the opinion of the lower courts, has rejected cover from an epidemic BI. The senate regarded the measures taken by the authorities during the pandemic as substantial increase of the risk to be taken over by the insurer, for which, however, no premium had been paid and therefore no cover could be provided.

You can see: the decisions of the courts are the result of an interpretation of new facts and situations to be matched with traditional insurance wordings.

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Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229

Safe through troublesome times

Investment policy of the insurance industry

After banks, the insurance sector is the second largest asset manager in Europe. The assets consist to a large extent of the funds paid in by the insured in the life insurance, on the other hand they serve to secure the obligations arising from the insurance contracts for the payment of claims. The asset strategy is checked by the supervisory authorities in each country and its principles must correspond to the provisions of EU law Solvency II. A management report from the supervisory authority provides information on the status and development of the investments (see: EIOPA Data and Figures Financial Stability Report: Investment split).

Traditional and new investment forms

The most important instrument for long-term security of the invested assets and regular income are bonds, which make up around 60% of all investments. These are divided into government bonds, corporate bonds and bond funds. The distribution between these forms differs from country to country and depends on the bid of the respective state or the private bond issues. As with all other investments, the decline in interest rates is noticeable, but insurers are reacting to this by taking out bonds with ever longer terms. In life insurance in particular, remaining terms of around 10 years can be found in the existing portfolios in Germany and Austria, while terms in other countries are still 5 to 6 years. In the next few years, however, there will be a major shift in this part of the assets when bonds expire and can only be replaced by those with a lower yield. So that the level of interest rates does not fall too sharply, there is a tendency towards bonds from issuers with lower credit ratings, but these still make up a very small part of the portfolio. In terms of issuers, insurers concentrate on European countries and companies in addition to their home countries, with a focus on the large industrialized nations of France, Germany, the Netherlands and Belgium.

Investing in shares, apart from strategic investments and the establishment of own corporations, has lost a lot of importance after the crises at the beginning of the new millennium. The possible volatility is difficult to reconcile with the insurance business model and with the new regulations. In Austria, the share of equity investments fell to 1.2% in 2018, in other countries it is slightly higher, but without reaching the former proportions (e.g. 20 to 30% in Switzerland).

In search of an interesting total return, real estate investment has received a new boost. This form of investment is historically important for insurers because it also makes a reliable contribution to stable values and regular income. The construction boom of recent years, both in residential construction and in the construction of commercial properties with the corresponding financing requirements, has also given the insurance sector new impetus. In Austria, the total investment in real estate on the market has grown to over 10%; with individual companies, real estate is already the second major pillar of all investments with a share of around 40%. This development is similar across Europe, with local differences that result from the economic development of the respective country.

The construction sector is also an opportunity for other investments by insurers: there is an increasing willingness to invest in infrastructure projects and to participate in private-public partnerships in order to make an interesting contribution to total returns (search-for-yield policy). In recent years, the share of this type of investment has tripled due to the great demand. The investment of the insurer is rounded off by individual loans, mortgages and cash deposits at banks, which make up a maximum of 10% of the total portfolio.

Which influencing factors can be expected that can determine the success of the investment policy?

In recent years, the positive factors (very good international economic situation with steady growth, increase in the volume of insurance premiums, investments in large infrastructure projects) have been countered by the pronounced low interest rate phase as the most important negative parameter. Uncertainty factors in both directions included climate change, Brexit, demographic changes, increasing digitization and the beginning of a trade dispute between the great powers.

Then the global economy was surprised by Covid-19. The economic consequences of the pandemic and the countermeasures that have a direct negative impact on the economy cannot yet be assessed today. The insurance business model will have to accept certain losses both in the core area (receipt of premiums to finance claims and pensions) and in the investment field. The long-term nature of the business in both areas and the investment in countries and companies with very good credit ratings (75% of all bonds relate to the three best credit ratings) suggest that the insurance industry will also master this crisis very well.

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Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229

Around the world …

The COVID-19 pandemic has made at least one thing clear: the risks for business travellers are on the rise. However, it remains interesting for SMEs to extend their radius of activity, as global sales channels offer financial opportunities. But it is advisable to take a few precautions.

Business travellers are usually focused on their task and do not think too much about their own risks before taking a trip – if it doesn’t actually involve Iraq, Syria or other conflict zones or if, unlike recently, a pandemic breaks out, there are still the risks of infections and of borders being closed.

Companies often neglect their legal duty of care. This was the case with Mr L. who was meant to be taken from the airport to his hotel by taxi in an Eastern European country. At a red light, two men got into the vehicle all of a sudden and threatened him with a weapon. Mr L. abruptly realised the seriousness of the situation. He was kept at a remote location for five hours, beaten and forced to disclose passwords and the PIN codes for his credit cards – in what is known as an “express kidnapping”.

In South America, the perpetrators often sell the victim on to criminal organisations if they consider that this would be “lucrative”. The hostage then has a higher going rate and the holdup becomes directly an abduction with a ransom demand.

Professional crisis management plays a major role in an abduction where a person’s life is at stake. Only very few companies have their own corporate security or experience with these sorts of incidents.

Kidnap & Ransom insurance

Travel safety means being prepared and planning the first steps before you start your trip. Country information from authorities and private service providers is available online on different platforms. They mainly provide a good general overview of the relevant risks, but are not a “cure-all”. It is very important for the traveller to remain alert, and this can be ensured through travel safety training with advice on assessing realistic dangers, cultural factors, what to do in the event of criminal attacks, and how the traveller can personally detect and defend himself against attacks.

Kidnap and ransom policies not only cover payment of the ransom, but also the costs of crisis consultants, recovery or evacuation and other additional services. As part of their duty of care, insurers also sometimes offer preventive training by professionals or preparatory guidance for travellers. The trend within the DACH region is clearly moving towards crisis consultants from German-speaking countries. Their understanding of economic, legal, linguistic and cultural requirements guarantees a reasonable basis for cooperation in a spirit of trust. A 24/7 crisis hotline helps with managing unpredictable events.

Andreas Radelbauer
Corporate Trust
T +43 1 318 0151 0

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Andreas Krebs

Andreas Krebs

Head of Insurance Mediation Services

T +43 5 0404 229