Transport companies brace for higher insurance costs amid Russia sanctions

Situation is building up to a "perfect storm"

Transport companies brace for higher insurance costs amid Russia sanctions

Insurance News

By Mika Pangilinan

Transport companies are bracing for higher insurance and compliance costs as the economic sanctions imposed on Russia by Western countries continue to place more pressure on global trade. 

Reuters pointed to a survey conducted by law firm DWF, which found that 64% of transport companies expect to see increased insurance costs.

The survey a polled 50 senior executives from leading transport companies in the road, rail, sea, and air sectors.

Results showed that 64% also expect international sanctions to become more common in the future, while 56% of respondents said that a world with more sanctions would be riskier for their businesses.

Jonathan Moss, DWF's global head of transport sector, warned that the economic sanctions on Russia are adding to the considerable burden of compliance costs for businesses.

“The risk of non-compliance is serious as custodial sentences and large fines are a constant threat, and enforcement actions are likely to be instigated more regularly in the coming months,” Moss told Reuters.

Moss additionally noted that insurance premiums had risen notably in aviation, marine, energy, political risk, and cyber security.

“A rise in claims with jets stranded in Russia and vessels stuck in Black Sea ports, together with expected future losses, a collapse in investment returns, reduced capacity and recessionary pressures have contributed to unprecedented high premiums in some lines of business,” Moss said, calling the situation a “perfect storm.”

“The inability for insureds to access their asset with insurers unable to investigate claims, send in loss adjusters and transfer payment to experts because of sanctions rules are also contributing to upward pressure on rates,” he said further.

Russia has faced multiple sanctions since last year from Western countries following its invasion of Ukraine.

During the beginning of the conflict, aviation and marine businesses saw their insurance premiums soar, with Marsh reporting that global commercial insurance premiums increased 11% on average in the first quarter of 2022.

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