Dividends and Insurance premiums jump for some businesses exposed to war in Ukraine

In the world of risk management, there is usually an insurance to be bought to ensure if the worse happens, some money comes back to the company. It would not be surprising that premiums to war torn countries go up.

In an article from Reuters, insurance premiums are doubling or more for some aviation and marine businesses exposed to Ukraine.

Global commercial insurance premium rose 11% on average, according to insurance broker Marsh.

War is typically excluded from mainstream insurance policies. Customers have to buy extra war coverage on top of the normal insurance.

Garrett Hanrahan, global head of aviation at Marsh, said aviation war insurance was no longer available for Ukraine, Russia and Belarus.

S&P Global estimates insurance losses of $16 billion to $35 billion in so called specialty insurance classes such as aviation, marine, trade credit, political risk and cyber. Aviation insurance claims could reach $15 billion with hundreds of leased planes stranded in Russia.

In ship insurance, policyholders pay an additional breach premium when a ship enters particularly dangerous waters, locations are updated by the Lloyd’s market.

Linking to dividend paying stocks, when you buy a profitable company you expect a high quality of risk management department – who they will and will not deal with and what terms. Ideally the risk of not paying is low. For many global companies, war is a normal risk, because there are many wars which mean insurance companies have policies on how the situation moves forward. One of your homework is how does the risk management department work in your investments? and do they pass on costs to customers?

There are more questions than answers, till the next time – to raising questions.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s