Global conflicts stimulate the demand for war insurance insurance

With conflicts continuing in Ukraine and the Middle East, a global industry has never been so in demand-the war insurance market.

When a Russian missile damaged Natalia Grayko’s apartment in a tower on the outskirts of kyiv last November, she was fortunately not injured.

Mrs. Grayko’s daughter Alina Kalcheva says that the missile fell at around 100 meters (328 feet) from the building. “The breath wave damaged my mother’s balcony, the windows, the doors and the interior of the apartment.”

While her mother was “of course very upset and cried” to start, Ms. Kalcheva says that she was finally feeling calm because they had assured the apartment against such an attack.

Because, although general household insurance does not cover the damage caused by conflicts – that you live in Ukraine or in a country which is not attacked – Ms. Kalcheva had the foresight to withdraw the insurance of the risk of specialized war for its mother. And the insurer paid $ 1,000 (£ 740) to help cover repairs.

The premium or the annual cost was $ 52, and the 33 -year -old man says that she “did not hesitate to buy it. And it turned out that it was obviously the right decision”.

Ukrainian compatriot Ekaterina Vasylieva even took a war risk policy for her car in April 2024. It was particularly appropriate, because only one day later, his vehicle was damaged by Russian bursts of shells when he was parked in a street in the coastal city of Odesa.

“Only the day before, I approximated the full insurance on the car, and the director offered me to obtain insurance against military risks,” she said. “The blanket saved me a lot because after the Russian attack, the car looked like a sieve.”

Insurance against the risks of war is the general duration of a sector which also offers coverage against terrorism. Industry experts say that it has increased exponentially since September 11 attacks in the United States in 2001.

And while individuals can withdraw the coverage from war risks, the vast majority of policies are purchased by companies wishing to ensure their operations, facilities and their staff worldwide. Especially in high -risk countries and regions.

Although the data is difficult to find for an industry that does not seek the spotlight, a commercial publication said this year that the global amount spent to withdraw war risk insurance now totals around 1 billion dollars (800 million pounds sterling) per year.

And 621 million pounds sterling, or almost 80%, of this figure went to specialized insurers from the city of London, which is the center of the international war insurance market.

Joanna Cousins ​​leads a team of political violence and political war for nine people from one of these insurers based in London – Westfield Specialty.

It cites the example of a large energy installation in Iraq, owned by a Western company, which has been attacked several times in recent years.

Ms. Cousins ​​says that the owner finally bought more than 100 million pounds sterling in war risk coverage, without which he would have “ceased or considerably reduced” the operation of the site.

People in the war risk market are normally not very eager to talk about the amount of policy. But for a British or American company operating in Lebanon or Israel, “currently, bonuses have a price between 0.5% and 2% of the total coverage they buy,” explains a main london war risk subscriber who asked not to be appointed.

A subscriber is a finance professional who determines the level of risk of insurance request, then calculates the cost of the coverage.

The range of 0.5% to 2% means that if a company wants 100 million pounds of annual coverage, it must pay between £ 500,000 and 2 million pounds sterling. However, these rates “will fluctuate considerably because the situation in different countries in the Middle East is volatile”, adds the nameless subscriber.

The bonuses in stable gulf states would be much lower, from 0.025% to 0.05% of the total covered amount.

What is really covered by a policy can vary. For example, a company can be covered for kidnappings and ransoms, treatment of serious injuries or the cost of managing an “active assailant” situation.

“The market is able to capacity and demand,” explains Daniel Hiller, subscriber, group leader of terrorism and political violence in the insurer Munich Re Specialty.

“There are more perils that customers can buy coverage, especially around the active shooter product, but also strikes and riots.”

Risk war coverage is organized in seven “buckets” covering different serious conflicts. Sabotage and terrorism are considered the lowest, while civil and interstate war is the highest.

“Many insurers are trying to offer all this coverage, because often it is not clear where a situation has gone from the risk of terrorism, from civil war, even of the interstate war,” explains Raveem Ismail, founder of the specialized insurance firm London, Trigger Parametric.

The war risk sector is centered on London due to the continuous force of London Lloyds, which has been a specialized insurance market since 1689.

Lloyds also houses war insurance reinsurers – companies that buy and sell coverage.

Ms. Cousins ​​says it spreads possible exposure. “Each (reinsurer) covers a certain percentage of the risk, between one and 10%,” she said.

Constantin Gurdgiev, professor of finance at the University of Northern Colorado, and an expert in the study of risks on risks and conflicts, says that the challenge for the war risk sector is to determine the premium to invoice for coverage.

“Wars and conflicts more generally represent black (very rare) events,” he said. Due to this rarity, he adds that “historical data tends to be a low basis for establishing price ideas”.

However, Mr. Ismail stresses that warns of war risks can be very profitable, which he contrasts with the automotive insurance sector.

“As an automobile anxiety, for each £ 1 of the premiums that you absorb, you reimburse almost £ 1.05 in complaints,” he said. You might think that mathematics are not added there, but Dr Ismail says that car insurers are 5P and more from placement income.

On the other hand, war insurance funds can pay as little as 2%. In simple terms, car accidents are much more common than war damage.