Episode 1
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Welcome to
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Risk Matters,
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the insurance podcast brought to you
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by DWF and your global guide
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to the latest trends
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and issues in the insurance
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and reinsurance industry.
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Join us
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as we explore
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topical issues, emerging technologies
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and innovative strategies
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that are shaping the global future
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of insurance.
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Welcome
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to Risk Matters,
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the insurance podcast from DWF.
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My name is David Abbott
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and I am the head of the Political Risk
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Trade Credit and Political Violence
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Insurance team at DWF.
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Today our topic is Ukraine.
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As the war has now entered its third year
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and Ukrainian forces
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continue their defense
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against the Russian invasion,
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we are going to discuss
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how the Ukrainian economy is faring
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and how Ukrainian businesses
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are adapting to the war.
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We’re also going to explore
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how insurers are responding
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to the ongoing conflict,
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and what role insurance
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can play in helping
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to support the Ukrainian economy
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and ultimately help with the rebuilding.
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Once the war is over,
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which, of course, we all hope
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will happen as soon as possible.
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I know this is a topic
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that is absolutely
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at the forefront of people's minds
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across the London market
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and insurance industry generally,
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and particularly
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in the specialist political risk,
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political violence
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and trade credit fields.
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So I'm looking forward
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to this conversation.
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So I'd like
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to introduce our guests today.
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firstly,
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we have Olena Savchuk
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and Igor Krasovskiy from Integrites,
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a Ukrainian, law firm
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who we, at DWF have worked with
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on a number of projects.
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We are,
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very fortunate to have them with us.
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And they are,
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joining us from Kyiv in Ukraine.
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Igor or Olena, would you like to tell us
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a bit more about yourselves?
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and your practice?
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I will start then.
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So I do banking in finance, and I, lead
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a team of finance lawyers
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at the Kyiv office.
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We do regularly advise
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our clients on different cross-border
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finance transactions, including,
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we have a lot of clients
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for the insurance
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and reinsurance companies.
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So we would be
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more than happy
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to share some insights into the Ukrainian
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and Ukrainian business
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and how the insurance is currently,
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doing in Ukraine.
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Thank you for having us today.
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And we are so lucky to
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be able to cooperate
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and to work
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with our esteemed international partners
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and friends.
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And I hope that we'll be able
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shed some helpful light on the topics
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that we will be discussing today.
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Thanks, Olena.
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I am also very fortunate to have with me,
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Nick Hedley.
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Nick will be, very familiar,
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to any of our listeners
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that have worked in political risk,
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violence or trade credit.
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but perhaps,
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for those that haven't come across you,
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you could introduce yourself. Nick. Yes.
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Thank you.
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Well, I've got about 40 years
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experience in trade credits
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and political risk,
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both as a broker
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and as a more mostly as an underwriter.
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I headed up JLT’s,
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political risk and financial lines
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division in the, in the noughties.
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I moved to Latin American Underwriters
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after that
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AWAC bought Latin American
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Underwriters,
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and most recently
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I was head of political risk at Optio.
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My training really was ten years at AIG
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in the 80s and 90s.
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Thank you very much.
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So,
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as we're discussing,
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the response of the Ukrainian economy,
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Ukrainian businesses
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and insurance possibilities there.
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I thought we'd start with some, context
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and some background,
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around the Ukrainian economy,
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which I'm very pleased to say
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is actually responding,
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better and is in better health
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than a lot of commentators
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thought it would be.
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So a few stats,
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the National Bank of Ukraine states
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that the Ukrainian
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economic growth over 2023 was 5.7%,
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against a 23 forecast of 0.3%.
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The IMF and National Bank of Ukraine,
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project further economic
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growth of 4% in 2024.
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this, however, is,
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against the back,
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against the backdrop
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of a significant fall in GDP in 2022,
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which is obviously to be expected.
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Inflation is at, an estimated 5%.
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the IMF baseline,
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estimates suggest
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that the Ukrainian government's
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financing gap
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between revenues and expenditures,
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will be USD 85 billion,
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up to USD 104 billion
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from 24 to 27.
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The World Bank, the Ukrainian government,
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the EU and the UN have estimated
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the reconstruction
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and recovery costs for Ukraine
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at approximately 486 billion
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US over the next decade.
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The IMF, as well as the, EU
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accession process,
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are requiring structural reforms
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to the Ukrainian economy,
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including on fiscal policy,
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governance and anti-corruption.
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As part of their application
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to join the EU.
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So that's an interesting, economic mix.
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for us to,
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to access background
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to our conversation, David,
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but I just add one statistic to that,
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which I read this morning,
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which I believe to be accurate
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when the cost of the Russian aggression
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has led to debt to GDP ratio increasing
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from under 50% in 2021
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to just under 100% today.
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So this
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massive debt has been piled up
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as a result of the Russian aggression.
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And of course, you add now
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$480 billion of reconstruction cost.
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We're going to come on to this later.
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But, you know,
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there was a significant
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financing requirement
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that's that's
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that arises from all of this
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and how the
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West in particular copes with that debt
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and what they do with it.
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is going to be at the core
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of what happens next, I expect.
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Yes, indeed.
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so we'll just start
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by focusing on the economy.
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And a question for Integrites,
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around their clients
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and what you're experiencing
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in the market that you're in right now.
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What are clients
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telling you
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about their experience
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of doing business in Ukraine in 2024?
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How are things?
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So surprisingly, but,
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despite the ongoing war and, great level,
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great level of uncertainty
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about the future, the business activity
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has been growing after the economy,
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slumped dramatically
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in the early days of invasion.
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And I think that this became possible
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due to continued support to the,
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key allies of Ukraine,
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including the United States of America,
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United Kingdom
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and European Union,
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as well as many other countries who
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which have deployed various programs
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and initiatives,
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aimed to support businesses in Ukraine.
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in addition, the
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international financial institutions
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and the
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development banks such as the EBRD, IFC
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DFC and MIGA also play
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a very crucial role
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in providing necessary emergency
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financing for the Ukrainian business
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and providing the coverage
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against the war
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risk for local
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and then foreign investments in Ukraine.
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So another you know, historically,
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Ukraine is one of the largest exporter
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of the commodities.
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And therefore,
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it was important for us
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when all the main Ukrainian seaports
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were, unlocked and opened for trade
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and therefore exporting
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grains and commodities.
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And of course, you know,
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the business
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currently and our clients, they do work
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in the very challenging environment
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because of the irregular airstrikes,
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because of the relocation of employees
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and staff,
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because of the strict capital
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and exchange controls
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and some losses
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they also incurred
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directly as a result of the war.
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however, overall,
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the situation is much better
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for our clients compared to 2022.
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and some of our clients
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who are the big international companies,
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they reinvest,
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their profits again in Ukraine,
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and they expand their presence
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in the Ukrainian markets.
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some of the clients, the, you know,
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invest may make new investments and,
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launch, a completely new construction
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and projects currently in Ukraine.
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Most of those projects
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are located in the eastern
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and western parts
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and distant from the frontline
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in order to reduce risk.
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But I would say that, you know, we see,
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a tremendous resilience of
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the Ukrainian business
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and the tremendous resilience
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of the foreign business,
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which is present in Ukraine.
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And do
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just to follow up on that.
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obviously there is a very big difference
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between areas
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that are near the battlefront and areas
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that are further to the West
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Lviv, for example,
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are foreign investors clear about the distinction.
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Are they happy to invest in,
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the areas around Lviv and so on?
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Is business around there?
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Is that
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is there a certain sense of things
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being normal around there,
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or is the entire country affected
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so because of the airstrike, you know,
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technically
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the entire country is affected
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because the airstrike can be
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airstrikes can be
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in Lviv
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the very western part of Ukraine.
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but still, of course, the risk,
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the risk is more low in the central and
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eastern part
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in the western part of Ukraine
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compared to the eastern
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and south of Ukraine.
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And usually
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what we see is some of the clients,
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they do have a very strict policy
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that they are allowed
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to invest in the central
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and western part of Ukraine,
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but they're not ready
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to take some additional risk
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in those areas
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which are near to the front line.
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That's true.
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But some of the clients are more
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and more
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willing to take additional risk
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and ready to invest, and do projects,
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even in the eastern part of Ukraine,
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especially if those
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projects relate
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to critical infrastructure.
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So you are seeing, in fact,
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a number of clients,
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a number of people
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willing to do business in the Ukraine
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being brave about,
00:10:44:01 - 00:10:48:00
the risk in the Ukraine and being serious
00:10:48:00 - 00:10:49:01
about the potential
00:10:49:01 - 00:10:52:01
for the future in the Ukraine.
00:10:52:19 - 00:10:54:11
Yeah, I would say that,
00:10:54:11 - 00:10:54:21
you know,
00:10:54:21 - 00:10:55:16
I can’t say that
00:10:55:16 - 00:10:58:21
there are a lot of new foreign companies
00:10:58:21 - 00:11:00:08
coming into Ukraine these days
00:11:00:08 - 00:11:01:19
because of the risk,
00:11:01:19 - 00:11:02:21
but the good
00:11:02:21 - 00:11:04:21
the good thing is that those companies
00:11:04:21 - 00:11:06:11
which would do
00:11:06:11 - 00:11:08:14
business in Ukraine before the war,
00:11:08:14 - 00:11:10:10
they continue to do business now.
00:11:10:10 - 00:11:12:20
So they continue to invest more,
00:11:12:20 - 00:11:14:08
will reinvest their profits.
00:11:14:08 - 00:11:15:11
And I think it's
00:11:15:11 - 00:11:16:13
already a good achievement.
00:11:16:13 - 00:11:18:02
So we are mostly not talking
00:11:18:02 - 00:11:19:06
about new business,
00:11:19:06 - 00:11:21:05
but about the existing business
00:11:21:05 - 00:11:23:14
and the continuation of,
00:11:23:14 - 00:11:25:08
you know, the activities in Ukraine.
00:11:27:04 - 00:11:29:00
So what I'm hearing is that the
00:11:29:00 - 00:11:31:10
the challenge is in fact,
00:11:31:10 - 00:11:34:10
now and possibly going forward
00:11:34:18 - 00:11:36:17
is the, is the attraction of,
00:11:36:17 - 00:11:37:16
of new companies
00:11:37:16 - 00:11:40:16
and new businesses, new finance.
00:11:40:21 - 00:11:41:21
they're perhaps
00:11:41:21 - 00:11:43:05
have stepped back at the moment,
00:11:43:05 - 00:11:45:02
but it's encouraging
00:11:45:02 - 00:11:48:01
those people into the Ukraine,
00:11:48:01 - 00:11:50:02
whereas with existing businesses
00:11:50:02 - 00:11:52:01
they're actually still committed.
00:11:52:01 - 00:11:53:24
Yes, exactly. You're you're quite right.
00:11:53:24 - 00:11:56:08
And I think that the biggest challenge,
00:11:56:08 - 00:11:57:09
for the new companies
00:11:57:09 - 00:11:58:20
and for the new investors
00:11:58:20 - 00:12:01:20
is the control risk and is the war risk.
00:12:02:00 - 00:12:05:00
And, until and unless there will be
00:12:05:09 - 00:12:07:00
a stronger instruments
00:12:07:00 - 00:12:09:21
available to mitigate those war risks
00:12:09:21 - 00:12:10:22
obviously there
00:12:10:22 - 00:12:12:08
there won't be a lot of companies
00:12:12:08 - 00:12:13:23
willing to invest in Ukraine.
00:12:13:23 - 00:12:15:24
I mean, new investors.
00:12:15:24 - 00:12:18:04
So obviously which will come to with,
00:12:18:04 - 00:12:19:23
with Nick in a bit.
00:12:19:23 - 00:12:22:21
But it sounds then like the,
00:12:22:21 - 00:12:24:14
the insurance industry has a critical
00:12:24:14 - 00:12:25:24
role to play in encouraging
00:12:26:24 - 00:12:28:11
new investors in.
00:12:28:11 - 00:12:30:17
Can I ask what sectors
00:12:30:17 - 00:12:31:16
you're talking about?
00:12:31:16 - 00:12:33:18
Mainly the existing investors
00:12:33:18 - 00:12:34:14
who, increase
00:12:34:14 - 00:12:37:14
or reinvesting their profits.
00:12:37:19 - 00:12:40:01
is it any particular sector?
00:12:40:01 - 00:12:42:21
Is it manufacturing, is it agriculture?
00:12:42:21 - 00:12:46:04
Is it retail or all of the above?
00:12:46:05 - 00:12:47:02
I suppose
00:12:47:02 - 00:12:49:00
perhaps you give us a sense of what
00:12:49:00 - 00:12:51:20
what industries we're talking about.
00:12:51:20 - 00:12:54:14
so you know that the Ukraine is very
00:12:54:14 - 00:12:55:04
well known
00:12:55:04 - 00:12:56:21
for the agriculture,
00:12:56:21 - 00:12:59:05
and obviously most of the investments
00:12:59:05 - 00:12:59:13
are where
00:12:59:13 - 00:13:00:16
investments are made
00:13:00:16 - 00:13:03:00
in the agricultural sector.
00:13:03:00 - 00:13:05:00
First of all, because,
00:13:05:00 - 00:13:05:07
you know,
00:13:05:07 - 00:13:05:22
this is the main
00:13:05:22 - 00:13:06:21
the agriculture
00:13:06:21 - 00:13:08:20
and the export of soft commodities
00:13:08:20 - 00:13:10:21
remain to be at the main income
00:13:10:21 - 00:13:13:09
of foreign currency, in Ukraine.
00:13:13:09 - 00:13:14:19
So basically,
00:13:14:19 - 00:13:16:22
you know, the agriculture and companies
00:13:16:22 - 00:13:18:08
they affected badly,
00:13:18:08 - 00:13:20:23
but they still continue doing quite well.
00:13:20:23 - 00:13:22:03
another,
00:13:22:03 - 00:13:25:05
you know, sector would be, energy
00:13:25:10 - 00:13:27:22
because energy is traditionally strong
00:13:27:22 - 00:13:31:17
in Ukraine and because, the network,
00:13:31:17 - 00:13:32:18
the energy network
00:13:32:18 - 00:13:35:00
was targeted by Russians.
00:13:35:00 - 00:13:36:22
a lot of investments were made
00:13:36:22 - 00:13:38:13
to repair the,
00:13:38:13 - 00:13:40:11
the energy electricity network
00:13:40:11 - 00:13:41:22
in order to provide
00:13:41:22 - 00:13:43:10
additional resilience
00:13:43:10 - 00:13:45:23
and to invest in some, you know,
00:13:45:23 - 00:13:48:15
renewables like battery storages
00:13:48:15 - 00:13:49:22
and also renewables
00:13:49:22 - 00:13:51:10
capacities in order to, you know,
00:13:52:19 - 00:13:55:09
to respond to the,
00:13:55:09 - 00:13:56:18
demolition and destruction
00:13:56:18 - 00:13:59:18
of the traditional energy.
00:14:01:07 - 00:14:02:24
It's actually very interesting
00:14:02:24 - 00:14:04:21
because we see many
00:14:04:21 - 00:14:06:16
agricultural producers
00:14:06:16 - 00:14:09:15
expanding their operations and trying
00:14:09:15 - 00:14:12:17
to conquer new sectors and new markets
00:14:12:17 - 00:14:14:08
and trying to,
00:14:14:08 - 00:14:17:08
expand to new international, areas.
00:14:17:10 - 00:14:18:00
For example,
00:14:18:00 - 00:14:21:00
many of the producers who only exported,
00:14:21:00 - 00:14:23:12
they started, food processing
00:14:23:12 - 00:14:25:05
and they started building silos
00:14:25:05 - 00:14:27:17
and they started, storage facilities.
00:14:27:17 - 00:14:30:17
So this might be about diversification,
00:14:30:22 - 00:14:32:13
but also about expanding
00:14:32:13 - 00:14:35:13
and about trying to, navigate
00:14:35:13 - 00:14:38:13
through the challenging circumstances.
00:14:38:18 - 00:14:39:09
so it,
00:14:39:09 - 00:14:39:15
you know,
00:14:39:15 - 00:14:40:02
you mentioned
00:14:40:02 - 00:14:43:02
sort of new opportunities there.
00:14:43:03 - 00:14:44:24
we're at the,
00:14:44:24 - 00:14:46:12
one of the main,
00:14:46:12 - 00:14:46:24
political risk
00:14:46:24 - 00:14:48:05
trade credit,
00:14:48:05 - 00:14:50:10
conferences called the ExCred
00:14:50:10 - 00:14:51:01
and the view.
00:14:51:01 - 00:14:52:13
There seem to be
00:14:52:13 - 00:14:53:15
that there is,
00:14:53:15 - 00:14:56:12
loss of liquidity in Ukrainian banks
00:14:56:12 - 00:14:58:02
and that there was actually a lot of,
00:15:00:02 - 00:15:00:09
a lot
00:15:00:09 - 00:15:01:22
of potential finance
00:15:01:22 - 00:15:04:03
available for new businesses,
00:15:04:03 - 00:15:06:22
and a reduced need for,
00:15:06:22 - 00:15:09:14
trade credit finance from outside.
00:15:09:14 - 00:15:12:17
Is that something you're seeing or,
00:15:12:20 - 00:15:13:13
was that people
00:15:13:13 - 00:15:16:14
not interpreting things correctly at the conference?
00:15:17:05 - 00:15:19:02
speaking about barriers,
00:15:19:02 - 00:15:22:02
there are some actually,
00:15:22:07 - 00:15:24:03
the biggest barrier,
00:15:24:03 - 00:15:27:02
is probably currency restrictions,
00:15:27:02 - 00:15:28:12
which were put in place
00:15:28:12 - 00:15:30:05
from the outset of the full scale
00:15:30:05 - 00:15:32:09
war on the very first day.
00:15:32:09 - 00:15:34:18
But,
00:15:34:18 - 00:15:36:14
well, companies
00:15:36:14 - 00:15:38:09
do face difficulties.
00:15:38:09 - 00:15:41:09
They are still, they remain committed
00:15:41:15 - 00:15:42:08
to honouring
00:15:42:08 - 00:15:44:24
their contractual obligations.
00:15:44:24 - 00:15:46:13
well, from our experience,
00:15:46:13 - 00:15:48:00
we see that many companies
00:15:48:00 - 00:15:50:03
try to negotiate restructurings
00:15:50:03 - 00:15:52:06
and try to speak to their lenders
00:15:52:06 - 00:15:53:12
and try to do business
00:15:53:12 - 00:15:56:12
as usual to the fullest extent,
00:15:57:09 - 00:16:00:05
as it is possible.
00:16:00:05 - 00:16:02:06
and the legislation is also evolving,
00:16:02:06 - 00:16:02:23
you know, the,
00:16:04:05 - 00:16:06:02
there are barriers, but
00:16:06:02 - 00:16:07:19
the legislation is adapting
00:16:07:19 - 00:16:09:24
to the challenging environment.
00:16:09:24 - 00:16:11:01
For example,
00:16:11:01 - 00:16:14:01
starting from the February 2022,
00:16:14:21 - 00:16:16:20
the restrictions that have been in place
00:16:16:20 - 00:16:19:06
since then are not the same anymore.
00:16:19:06 - 00:16:22:04
And, the the biggest task
00:16:22:04 - 00:16:23:13
of Ukrainian government
00:16:23:13 - 00:16:26:16
and of the central bank was always to,
00:16:27:12 - 00:16:30:12
help producers from Ukraine to
00:16:30:18 - 00:16:32:01
do business,
00:16:32:01 - 00:16:34:16
and to export and to produce
00:16:34:16 - 00:16:35:20
and to manufacture.
00:16:35:20 - 00:16:37:22
So they,
00:16:37:22 - 00:16:38:21
I would say that the
00:16:38:21 - 00:16:40:01
legislation has evolved
00:16:40:01 - 00:16:41:09
to account for that
00:16:41:09 - 00:16:44:20
and to give them the opportunity to work
00:16:45:00 - 00:16:45:11
and to
00:16:45:11 - 00:16:48:11
to continue trading with their, partners.
00:16:49:22 - 00:16:52:08
another example is the work
00:16:52:08 - 00:16:55:01
of the Ukrainian expert credit agency.
00:16:55:01 - 00:16:57:11
So starting
00:16:57:11 - 00:16:59:18
three years into the big war,
00:16:59:18 - 00:17:00:19
they have been given
00:17:00:19 - 00:17:04:05
the right to insure and reinsure
00:17:05:01 - 00:17:06:01
local producers
00:17:06:01 - 00:17:07:14
as well as foreign
00:17:07:14 - 00:17:08:22
companies entering the market
00:17:08:22 - 00:17:10:03
and to reinsure,
00:17:10:03 - 00:17:12:11
which is something unheard of, actually,
00:17:12:11 - 00:17:14:13
this is new. This is a novelty.
00:17:14:13 - 00:17:17:13
And what all of us are expecting,
00:17:17:13 - 00:17:19:10
and are well,
00:17:19:10 - 00:17:20:07
we are fascinated
00:17:20:07 - 00:17:23:07
how all this would work, but, this is,
00:17:23:17 - 00:17:26:06
something, which signifies,
00:17:26:06 - 00:17:27:09
a great development and,
00:17:27:09 - 00:17:28:21
and actually that the,
00:17:28:21 - 00:17:30:23
a great resilience,
00:17:30:23 - 00:17:33:19
that new mechanisms like this evolve.
00:17:34:23 - 00:17:36:06
The other thing that was mentioned
00:17:36:06 - 00:17:38:04
at the same conference and Nick,
00:17:38:04 - 00:17:38:11
you might
00:17:38:11 - 00:17:39:15
maybe you can comment on this,
00:17:39:15 - 00:17:40:18
but the other thing that was mentioned
00:17:40:18 - 00:17:41:03
was that
00:17:41:03 - 00:17:44:12
there is some interest from, export,
00:17:45:15 - 00:17:49:04
credit agencies, I think Canada and
00:17:50:22 - 00:17:53:22
Belgium.
00:17:54:05 - 00:17:54:14
looking
00:17:54:14 - 00:17:57:16
to underwrite some deals in, Ukraine.
00:17:57:16 - 00:17:59:00
Is that something you're you've seen?
00:17:59:00 - 00:17:59:14
Yes.
00:17:59:14 - 00:18:00:15
That's,
00:18:00:15 - 00:18:01:16
that's what I read
00:18:01:16 - 00:18:02:18
and that's what I understand.
00:18:02:18 - 00:18:05:05
But I think it's mostly short term,
00:18:05:05 - 00:18:06:18
you know, 30 day
00:18:06:18 - 00:18:09:00
end of the month, following month type invoices.
00:18:09:00 - 00:18:09:16
It's not
00:18:09:16 - 00:18:10:00
I think
00:18:10:00 - 00:18:12:09
if you went to the market with
00:18:12:09 - 00:18:15:09
a three year, prepayment, you know, for
00:18:15:16 - 00:18:16:21
Met Invest, for instance,
00:18:16:21 - 00:18:17:11
that would be
00:18:17:11 - 00:18:19:00
absolutely uninsurable at the moment.
00:18:19:00 - 00:18:21:08
But I think short term
00:18:21:08 - 00:18:22:01
trade credit
00:18:22:01 - 00:18:23:15
that there is probably some appetite
00:18:23:15 - 00:18:24:16
there from the ECAs.
00:18:24:16 - 00:18:25:12
I don't think there's much
00:18:25:12 - 00:18:26:16
in the private market, though.
00:18:26:16 - 00:18:27:20
I think the private market
00:18:27:20 - 00:18:29:00
is almost completely
00:18:29:00 - 00:18:29:23
closed at the moment.
00:18:30:23 - 00:18:32:02
That's what I hear anyway.
00:18:32:02 - 00:18:35:07
So some ECA, short tenors and
00:18:36:05 - 00:18:37:05
anything with any length
00:18:37:05 - 00:18:38:20
looks very difficult right now.
00:18:38:20 - 00:18:40:00
Yes that's right.
00:18:40:00 - 00:18:41:00
And are you seeing
00:18:41:00 - 00:18:44:01
is that what you're seeing in from
00:18:44:01 - 00:18:45:10
the Ukrainian perspective,
00:18:45:10 - 00:18:48:01
Olena and Igor, or are you seeing,
00:18:48:01 - 00:18:49:15
any export credit
00:18:49:15 - 00:18:52:21
agency activity in, in the Ukraine?
00:18:52:21 - 00:18:53:04
Are you are
00:18:53:04 - 00:18:53:23
you aware of that
00:18:53:23 - 00:18:56:17
from the business perspective?
00:18:56:17 - 00:18:59:03
Well, as I just said, we see the demand
00:18:59:03 - 00:19:02:03
for ECA coverage and it's growing.
00:19:03:00 - 00:19:03:20
As I just said,
00:19:03:20 - 00:19:05:20
the Ukrainian ECA
00:19:05:20 - 00:19:07:24
is currently entering.
00:19:07:24 - 00:19:10:24
So to see the market,
00:19:11:09 - 00:19:12:09
and it is planned
00:19:12:09 - 00:19:14:03
that they are going to be insuring
00:19:14:03 - 00:19:14:24
and reinsurance
00:19:14:24 - 00:19:17:24
local market as well as foreign companies
00:19:18:09 - 00:19:21:00
who are looking to invest into Ukraine.
00:19:21:00 - 00:19:23:19
If you speak about foreign ECAs,
00:19:23:19 - 00:19:25:07
you know, experience,
00:19:25:07 - 00:19:28:18
they were mostly willing to work with the
00:19:28:18 - 00:19:29:18
foreign subsidiaries,
00:19:31:17 - 00:19:32:07
even when the
00:19:32:07 - 00:19:32:24
company was
00:19:32:24 - 00:19:35:24
beneficially owned by Ukrainian, owners,
00:19:36:09 - 00:19:39:05
they were looking into working with,
00:19:39:05 - 00:19:40:03
foreign subsidiaries.
00:19:40:03 - 00:19:41:08
And,
00:19:41:08 - 00:19:42:11
that was experienced
00:19:42:11 - 00:19:44:15
even before the full scale war.
00:19:44:15 - 00:19:46:23
But still the limits are too low.
00:19:46:23 - 00:19:49:23
And, even if we see the demand,
00:19:50:11 - 00:19:51:11
I can
00:19:51:11 - 00:19:52:22
confirm that there is a demand
00:19:52:22 - 00:19:54:17
for ECA coverage,
00:19:54:17 - 00:19:56:15
but, the limits are not sufficient,
00:19:56:15 - 00:19:57:17
unfortunately,
00:19:57:17 - 00:20:00:00
to cover the growing limits.
00:20:00:00 - 00:20:03:00
to cover the growing demand.
00:20:03:03 - 00:20:04:04
given the risks.
00:20:04:04 - 00:20:06:21
Olena, can I ask you to elaborate?
00:20:06:21 - 00:20:08:21
Where is the demand?
00:20:08:21 - 00:20:10:16
Is it for short term
00:20:10:16 - 00:20:11:24
imports into Ukraine?
00:20:11:24 - 00:20:14:18
Is it for long term export finance?
00:20:14:18 - 00:20:16:18
Is it for foreign direct investment?
00:20:16:18 - 00:20:17:22
Where is the
00:20:17:22 - 00:20:20:22
where is the unmet, unmatched demand?
00:20:21:05 - 00:20:22:13
You know,
00:20:22:13 - 00:20:23:09
in Ukraine,
00:20:23:09 - 00:20:26:09
where are the Western European ECAs
00:20:26:10 - 00:20:28:24
not providing the support that's needed?
00:20:28:24 - 00:20:30:15
Most of the clients,
00:20:30:15 - 00:20:31:21
we have worked with
00:20:31:21 - 00:20:32:21
were inquiring
00:20:32:21 - 00:20:34:00
about short term
00:20:34:00 - 00:20:36:04
financing for their cross-border
00:20:36:04 - 00:20:37:04
trade operations.
00:20:39:01 - 00:20:41:16
so OpEx,
00:20:41:16 - 00:20:43:10
for trade with Ukraine
00:20:43:10 - 00:20:46:10
or, inside of the European Union.
00:20:46:22 - 00:20:49:19
So we are mostly speaking about,
00:20:49:19 - 00:20:52:00
several,
00:20:52:00 - 00:20:56:09
millions or €10, €20, €30 million,
00:20:56:15 - 00:20:57:14
something like this.
00:20:57:14 - 00:21:00:02
So this is the coverage,
00:21:00:02 - 00:21:01:05
we are mostly seeing,
00:21:01:05 - 00:21:02:22
but as I said, the demand is growing.
00:21:02:22 - 00:21:04:06
So,
00:21:04:06 - 00:21:06:02
the ECA coverage could be
00:21:06:02 - 00:21:07:21
an unlimited opportunity
00:21:07:21 - 00:21:10:20
for Ukrainian, companies and Ukrainian
00:21:10:20 - 00:21:12:14
to work with Europe
00:21:12:14 - 00:21:13:24
and the rest of the world.
00:21:13:24 - 00:21:16:10
It's a short term trade credit
00:21:16:10 - 00:21:18:01
where there is most need.
00:21:18:01 - 00:21:19:13
I would like to add, just to
00:21:19:13 - 00:21:20:05
a quick point.
00:21:20:05 - 00:21:21:02
Yes, you're right.
00:21:21:02 - 00:21:24:11
Mostly the ECA's they provide
00:21:24:11 - 00:21:27:11
the short term credit or
00:21:27:17 - 00:21:28:17
credit coverage,
00:21:28:17 - 00:21:30:08
but there are some ECA's'
00:21:30:08 - 00:21:31:23
which are have appetite
00:21:31:23 - 00:21:33:01
for the so-called long
00:21:33:01 - 00:21:35:11
term sovereign or sub sovereign risk.
00:21:35:11 - 00:21:36:02
For example,
00:21:36:02 - 00:21:36:23
we've been involved
00:21:36:23 - 00:21:38:00
in a number of the deals
00:21:38:00 - 00:21:39:02
where, for example,
00:21:39:02 - 00:21:42:15
UK Export Finance
00:21:42:23 - 00:21:45:11
covered a long term financing
00:21:45:11 - 00:21:47:04
to the Ukrainian government
00:21:47:04 - 00:21:50:03
or to the sub sovereign enterprises,
00:21:50:03 - 00:21:51:08
to cover the war
00:21:51:08 - 00:21:53:22
risk and political risks actually.
00:21:53:22 - 00:21:54:17
And the financing
00:21:54:17 - 00:21:55:12
was provided
00:21:55:12 - 00:21:57:04
to finance the reconstruction
00:21:57:04 - 00:21:59:00
of the roads and the bridges
00:21:59:00 - 00:22:01:07
and some other infrastructure
00:22:01:07 - 00:22:02:14
projects in Ukraine.
00:22:02:14 - 00:22:03:10
So basically,
00:22:03:10 - 00:22:05:06
yes, there are short term
00:22:05:06 - 00:22:06:11
credits available
00:22:06:11 - 00:22:08:01
from, ECAs,
00:22:08:01 - 00:22:10:10
but there are also long term transactions
00:22:10:10 - 00:22:13:18
which are, covered by some of the ECAs,
00:22:14:11 - 00:22:17:14
in addition to the UK export finance,
00:22:17:14 - 00:22:21:01
I would also mention, BPI France
00:22:21:01 - 00:22:23:23
BPI France is very active in
00:22:23:23 - 00:22:24:22
covering the risks
00:22:24:22 - 00:22:26:09
of the French companies
00:22:26:09 - 00:22:27:20
doing business in Ukraine
00:22:27:20 - 00:22:29:07
or investing in Ukraine,
00:22:29:07 - 00:22:31:01
including long term projects.
00:22:32:09 - 00:22:32:19
Thank you.
00:22:32:19 - 00:22:33:06
That's,
00:22:33:06 - 00:22:36:04
that's probably a useful moment to,
00:22:36:04 - 00:22:38:18
turn our focus more completely to,
00:22:38:18 - 00:22:40:05
the insurance market.
00:22:43:14 - 00:22:44:00
Igor or Olena
00:22:44:00 - 00:22:44:15
And I wonder if you could
00:22:44:15 - 00:22:46:08
perhaps just give us a brief overview
00:22:46:08 - 00:22:49:08
of the Ukraine insurance market?
00:22:50:14 - 00:22:51:18
As it is today
00:22:51:18 - 00:22:53:12
and how it's changed,
00:22:53:12 - 00:22:55:05
since the start of the war.
00:22:55:05 - 00:22:58:05
Before 2022, the insurance market,
00:22:58:23 - 00:23:01:17
was pretty much growing,
00:23:01:17 - 00:23:03:18
pretty much steadily.
00:23:03:18 - 00:23:06:20
because we've seen that more businesses
00:23:06:20 - 00:23:07:17
and more individuals
00:23:07:17 - 00:23:10:11
were buying insurance,
00:23:10:11 - 00:23:13:03
insurance companies offered various types
00:23:13:03 - 00:23:13:21
of insurance
00:23:13:21 - 00:23:15:13
for life and health
00:23:15:13 - 00:23:17:20
and property and liability
00:23:17:20 - 00:23:20:03
and I myself cannot recall a year
00:23:20:03 - 00:23:21:05
in my professional life
00:23:21:05 - 00:23:23:03
when I didn't have the benefit
00:23:23:03 - 00:23:26:03
of, some insurance coverage,
00:23:26:12 - 00:23:29:12
included into the corporate package.
00:23:29:15 - 00:23:32:06
Since February 2022,
00:23:32:06 - 00:23:34:02
the insurance market in Ukraine
00:23:34:02 - 00:23:37:02
has been greatly affected by the war.
00:23:37:13 - 00:23:39:01
And, obviously,
00:23:39:01 - 00:23:41:06
there has been a lot of damage and,
00:23:41:06 - 00:23:43:05
loss of life, unfortunately.
00:23:43:05 - 00:23:45:13
So there are many insurance claims
00:23:45:13 - 00:23:47:11
many insurance events,
00:23:47:11 - 00:23:50:04
especially for property and, casualty.
00:23:52:03 - 00:23:54:21
despite the challenges,
00:23:54:21 - 00:23:55:22
the insurance companies
00:23:55:22 - 00:23:57:15
have been trying to adapt
00:23:57:15 - 00:24:00:15
and trying to keep up with the times.
00:24:00:15 - 00:24:03:15
I don't know about any
00:24:03:17 - 00:24:05:04
cases on the market
00:24:05:04 - 00:24:08:18
where insurance companies were rejecting,
00:24:09:17 - 00:24:10:23
insurance cases
00:24:10:23 - 00:24:13:13
which were connected with the war,
00:24:13:13 - 00:24:16:19
because the intention, seems to always be
00:24:16:19 - 00:24:17:18
to negotiate
00:24:17:18 - 00:24:19:04
and try to understand
00:24:19:04 - 00:24:21:14
the situation of the insured,
00:24:21:14 - 00:24:23:17
which is obviously a good thing.
00:24:23:17 - 00:24:26:17
In general, statistics show that,
00:24:27:23 - 00:24:30:23
the insurance premiums,
00:24:31:00 - 00:24:33:09
for various types of,
00:24:33:09 - 00:24:36:17
risks, in 2023,
00:24:37:01 - 00:24:41:14
they nearly equal the premiums in 2021.
00:24:41:14 - 00:24:44:17
So pre-war situation, and,
00:24:44:24 - 00:24:47:24
if you speak about indemnities,
00:24:47:24 - 00:24:49:19
the same applies to indemnity.
00:24:49:19 - 00:24:51:24
So they nearly equal the situation,
00:24:51:24 - 00:24:55:06
which was before the, full scale war.
00:24:56:24 - 00:24:58:17
and I, I've even seen
00:24:58:17 - 00:25:01:20
that property insurance premiums have,
00:25:02:12 - 00:25:05:16
increased by approximately
00:25:05:16 - 00:25:10:03
40 or 50% in, as compared to 2022.
00:25:10:03 - 00:25:14:03
So that, in 2022, we experienced
00:25:14:07 - 00:25:18:14
decrease in indemnities.
00:25:18:14 - 00:25:19:22
But in 2023,
00:25:19:22 - 00:25:22:22
the situation seems to be back to almost,
00:25:23:03 - 00:25:24:14
which was before the war.
00:25:24:14 - 00:25:26:09
And part of this,
00:25:26:09 - 00:25:27:05
growing demand
00:25:27:05 - 00:25:30:04
is for the political insurance.
00:25:30:04 - 00:25:31:16
some of the insurance companies
00:25:31:16 - 00:25:33:02
in Ukraine,
00:25:33:02 - 00:25:35:15
always provides this type of coverage,
00:25:35:15 - 00:25:38:09
but obviously there is a much greater
00:25:38:09 - 00:25:39:04
need for
00:25:39:04 - 00:25:41:08
for the international players
00:25:41:08 - 00:25:42:17
to join this effort.
00:25:43:24 - 00:25:45:13
And, well,
00:25:45:13 - 00:25:46:07
it's interesting
00:25:46:07 - 00:25:49:20
that three days into the, big war,
00:25:49:20 - 00:25:50:19
the regulator,
00:25:50:19 - 00:25:51:19
the National Bank,
00:25:51:19 - 00:25:53:05
has put a lot of restrictions
00:25:53:05 - 00:25:55:07
on cross-border trade capital flows.
00:25:55:07 - 00:25:56:20
But then they started
00:25:56:20 - 00:25:58:21
relaxing the restrictions.
00:25:58:21 - 00:25:59:11
And and
00:25:59:11 - 00:26:00:23
now there are many opportunities
00:26:00:23 - 00:26:01:18
for insurers
00:26:01:18 - 00:26:03:08
to pay abroad
00:26:03:08 - 00:26:06:00
and to pay reinsurance premiums
00:26:06:00 - 00:26:09:14
and to, work, continue working.
00:26:09:20 - 00:26:13:11
The regulator, tried to incentivise that,
00:26:13:11 - 00:26:14:15
all of the players
00:26:14:15 - 00:26:17:15
to use the electronic document flow
00:26:17:17 - 00:26:18:15
to minimise
00:26:18:15 - 00:26:21:15
the list of the documents, the evidence,
00:26:21:15 - 00:26:23:05
which I requested from the insurers
00:26:23:05 - 00:26:24:17
and so forth.
00:26:24:17 - 00:26:25:13
That's very interesting.
00:26:25:13 - 00:26:26:09
So what I'm hearing
00:26:26:09 - 00:26:27:13
is that actually,
00:26:27:13 - 00:26:29:21
since the start of the big war
00:26:29:21 - 00:26:30:20
domestic insurance
00:26:30:20 - 00:26:31:19
market is actually
00:26:31:19 - 00:26:32:15
in, in good
00:26:32:15 - 00:26:33:17
health, premiums
00:26:33:17 - 00:26:35:17
have reestablished themselves.
00:26:35:17 - 00:26:37:03
There's business going on.
00:26:37:03 - 00:26:38:01
I assume people's
00:26:38:01 - 00:26:40:05
everyday lives are being insured
00:26:40:05 - 00:26:41:10
as they were before.
00:26:41:10 - 00:26:44:10
But the real rise is in
00:26:44:10 - 00:26:46:05
war related products, which,
00:26:47:09 - 00:26:48:03
as I understand
00:26:48:03 - 00:26:49:01
from what you're saying,
00:26:49:01 - 00:26:51:24
since the big war started,
00:26:51:24 - 00:26:54:01
in Ukraine,
00:26:54:01 - 00:26:56:11
the local market is,
00:26:56:11 - 00:26:58:22
is developing those insurance products
00:26:58:22 - 00:27:00:11
to meet demand.
00:27:00:11 - 00:27:02:06
There is, though, a demand gap.
00:27:02:06 - 00:27:03:14
Right.
00:27:03:14 - 00:27:04:22
which,
00:27:04:22 - 00:27:06:09
Ukraine is hoping will be filled
00:27:06:09 - 00:27:07:22
by foreign insurers
00:27:07:22 - 00:27:08:18
and foreign investment.
00:27:08:18 - 00:27:11:03
Is that right?
00:27:11:03 - 00:27:13:07
That is definitely the situation.
00:27:13:07 - 00:27:15:02
There are various challenges
00:27:15:02 - 00:27:16:19
the market is facing,
00:27:16:19 - 00:27:17:12
not only
00:27:17:12 - 00:27:20:19
physical challenges like the damage, and,
00:27:21:18 - 00:27:23:18
political instability
00:27:23:18 - 00:27:26:18
and the changing legal environment.
00:27:27:13 - 00:27:29:16
but also uncertainty.
00:27:29:16 - 00:27:33:03
about whether we are going to,
00:27:33:20 - 00:27:36:11
expand the market or should we freeze it
00:27:36:11 - 00:27:37:20
or should we stabilise it
00:27:37:20 - 00:27:39:16
and then think about expansion
00:27:39:16 - 00:27:40:20
after the war ends,
00:27:40:20 - 00:27:42:02
so, yeah,
00:27:42:02 - 00:27:45:00
there is a lot of uncertainty, actually.
00:27:45:00 - 00:27:47:08
But the market is trying to adapt,
00:27:47:08 - 00:27:49:05
which is really a good, a good thing.
00:27:49:05 - 00:27:51:01
And we're speaking to many insurers
00:27:51:01 - 00:27:53:22
who are trying to collaborate even to,
00:27:54:23 - 00:27:55:10
provide
00:27:55:10 - 00:27:58:10
joint insurance on a joint basis and,
00:27:58:15 - 00:28:00:05
on a syndicated basis
00:28:00:05 - 00:28:03:05
and trying to look into this direction,
00:28:03:11 - 00:28:06:19
you know, while we are waiting for,
00:28:07:14 - 00:28:10:18
for our doors to open to international,
00:28:11:09 - 00:28:12:03
cooperation
00:28:12:03 - 00:28:14:04
and international players and,
00:28:14:04 - 00:28:15:18
foreign reinsurance,
00:28:15:18 - 00:28:18:01
the market is trying to survive
00:28:18:01 - 00:28:20:22
and keep the ball rolling.
00:28:20:22 - 00:28:22:08
Well, it sounds like another example
00:28:22:08 - 00:28:24:14
of Ukraine's incredible
00:28:24:14 - 00:28:27:06
adaptability and bravery in the face of
00:28:27:06 - 00:28:27:23
of the war.
00:28:27:23 - 00:28:29:24
So that's, that's very good to hear.
00:28:29:24 - 00:28:31:15
Not actually what I expected to hear,
00:28:31:15 - 00:28:33:17
but that's that's very good news.
00:28:33:17 - 00:28:36:03
You mentioned claims.
00:28:36:03 - 00:28:36:11
Nick,
00:28:36:11 - 00:28:36:23
perhaps you could
00:28:36:23 - 00:28:38:01
just give us an overview of your
00:28:38:01 - 00:28:40:18
or your view of,
00:28:40:18 - 00:28:42:18
the claims that have been,
00:28:42:18 - 00:28:43:24
happening in Ukraine, the
00:28:43:24 - 00:28:44:24
that have been paid out
00:28:44:24 - 00:28:46:16
by the London market. How that's gone.
00:28:46:16 - 00:28:48:03
I'm going to break this down
00:28:48:03 - 00:28:48:24
between claims
00:28:48:24 - 00:28:51:11
for political risk, which is where
00:28:51:11 - 00:28:53:00
the insured loses the asset,
00:28:53:00 - 00:28:54:14
whether that's due to a war risk,
00:28:54:14 - 00:28:57:11
whether it's due to abandonment risk.
00:28:57:11 - 00:28:58:07
And I can distinguish
00:28:58:07 - 00:29:01:00
that between the political violence,
00:29:01:00 - 00:29:03:05
claims, where there has to be an element
00:29:03:05 - 00:29:04:12
of physical damage
00:29:04:12 - 00:29:07:02
to the goods.
00:29:07:02 - 00:29:08:12
So, as I understand it,
00:29:08:12 - 00:29:09:20
talking to loss adjusters,
00:29:11:00 - 00:29:14:00
the headline figure of about a 1 billion USD
00:29:14:00 - 00:29:14:21
is what I'm hearing
00:29:14:21 - 00:29:17:04
in terms of paid claims.
00:29:17:04 - 00:29:20:12
People talk a lot about, for wind farms,
00:29:20:12 - 00:29:22:01
which have been destroyed
00:29:22:01 - 00:29:23:12
and there are some substantial
00:29:23:12 - 00:29:24:21
claims have been paid for that.
00:29:24:21 - 00:29:25:22
But I'm also aware of
00:29:25:22 - 00:29:27:08
sort of retail operations
00:29:27:08 - 00:29:29:09
which have been affected.
00:29:29:09 - 00:29:31:16
And of course, the commodity traders
00:29:31:16 - 00:29:33:00
with grain in,
00:29:33:00 - 00:29:35:07
you know, the Black Sea ports, they've,
00:29:35:07 - 00:29:37:19
you know, had substantial losses.
00:29:37:19 - 00:29:40:07
So that's the overall picture,
00:29:40:07 - 00:29:41:12
both political violence
00:29:41:12 - 00:29:43:11
and political risk.
00:29:43:11 - 00:29:46:04
The situation is perhaps
00:29:46:04 - 00:29:47:22
not entirely satisfactory.
00:29:47:22 - 00:29:48:22
Whilst there's been
00:29:48:22 - 00:29:50:03
fairly good performance
00:29:50:03 - 00:29:51:23
in terms of responding
00:29:51:23 - 00:29:53:11
to claims where the assets have been
00:29:53:11 - 00:29:55:23
physically damaged or destroyed,
00:29:55:23 - 00:29:58:02
there are some problems in two areas.
00:29:58:02 - 00:30:01:02
The first area is business interruption.
00:30:02:06 - 00:30:04:02
The example was given to me recently
00:30:04:02 - 00:30:05:12
that you might have relatively
00:30:05:12 - 00:30:07:23
insignificant physical damage to,
00:30:08:22 - 00:30:09:14
a wind farm,
00:30:09:14 - 00:30:10:18
maybe the generators
00:30:10:18 - 00:30:12:14
or the cables get damaged.
00:30:12:14 - 00:30:14:00
But if you can't get in
00:30:14:00 - 00:30:15:05
to repair the damage,
00:30:15:05 - 00:30:17:20
which you can't because of the situation,
00:30:17:20 - 00:30:19:04
then the business interruption
00:30:19:04 - 00:30:21:01
loss is potentially huge.
00:30:21:01 - 00:30:22:08
I know that one of the concerns
00:30:22:08 - 00:30:24:00
that Olena has raised with me in
00:30:24:00 - 00:30:24:11
the past
00:30:24:11 - 00:30:27:02
is the risk of of blockade in the Polish
00:30:27:02 - 00:30:29:11
Ukrainian border, in the blockade
00:30:29:11 - 00:30:30:00
is essentially
00:30:30:00 - 00:30:31:18
a business interruption loss,
00:30:31:18 - 00:30:33:07
and that hasn't been adequately covered.
00:30:33:07 - 00:30:34:22
Our market is very resistant
00:30:34:22 - 00:30:36:19
to covering business interruption
00:30:36:19 - 00:30:38:14
in addition to political violence
00:30:38:14 - 00:30:39:22
or political risks.
00:30:39:22 - 00:30:41:02
So that's one area
00:30:41:02 - 00:30:42:16
where I think the product
00:30:42:16 - 00:30:43:12
isn't responding
00:30:43:12 - 00:30:44:00
very well
00:30:44:00 - 00:30:45:06
to substantial business
00:30:45:06 - 00:30:47:15
interruption losses.
00:30:47:15 - 00:30:49:16
and they haven't really been covered
00:30:49:16 - 00:30:51:02
satisfactorily.
00:30:51:02 - 00:30:53:18
I assume just dealing with that business
00:30:53:18 - 00:30:54:10
point that,
00:30:56:15 - 00:30:57:15
that economics
00:30:57:15 - 00:30:59:06
is the basis of,
00:30:59:06 - 00:31:01:11
nervousness around business interruption.
00:31:01:11 - 00:31:02:10
I mean, if you compare it
00:31:02:10 - 00:31:03:07
with other markets,
00:31:03:07 - 00:31:04:16
if you compare, for example,
00:31:04:16 - 00:31:07:16
the energy market, in your average,
00:31:08:20 - 00:31:11:08
onshore energy loss,
00:31:11:08 - 00:31:13:11
the business interruption will often
00:31:13:11 - 00:31:16:11
far outstrip the physical damage.
00:31:17:06 - 00:31:19:04
and really the whole loss
00:31:19:04 - 00:31:20:03
and the adjustment of the loss
00:31:20:03 - 00:31:23:03
will be in large part about the BI.
00:31:23:03 - 00:31:27:04
So obviously once you start adding, BI,
00:31:27:04 - 00:31:29:03
which as I say from the lawyer
00:31:29:03 - 00:31:32:03
experience, that's a very,
00:31:32:03 - 00:31:33:14
it's absolutely not the case
00:31:33:14 - 00:31:35:14
that BI always appears to be covered.
00:31:35:14 - 00:31:36:14
Sometimes it's in there,
00:31:36:14 - 00:31:37:14
sometimes it's not in there.
00:31:37:14 - 00:31:40:14
But once you start adding BI in,
00:31:41:00 - 00:31:43:06
unless you're limiting it,
00:31:43:06 - 00:31:46:06
very clearly, then,
00:31:46:13 - 00:31:49:01
you're in a different game really then.
00:31:49:01 - 00:31:50:13
What it needs to be sub limited.
00:31:50:13 - 00:31:51:12
That needs to be limited there.
00:31:51:12 - 00:31:53:00
But frequently in the political risk
00:31:53:00 - 00:31:54:10
market, it's just excluded
00:31:54:10 - 00:31:56:07
or it's very difficult to obtain.
00:31:56:07 - 00:31:57:00
At Opito
00:31:57:00 - 00:31:58:20
When I was writing the political risk
00:31:58:20 - 00:31:59:08
there, we had,
00:31:59:08 - 00:32:01:03
I think, the widest form of
00:32:01:03 - 00:32:02:06
business interruption,
00:32:03:11 - 00:32:04:03
in the market.
00:32:04:03 - 00:32:04:12
So for
00:32:04:12 - 00:32:05:12
instance,
00:32:05:12 - 00:32:06:11
forced abandonment
00:32:06:11 - 00:32:07:07
is one of the standard
00:32:07:07 - 00:32:08:06
political risk perils.
00:32:08:06 - 00:32:10:04
And it's been obviously a trigger
00:32:10:04 - 00:32:11:17
for a number of losses in Ukraine,
00:32:11:17 - 00:32:13:00
where the assets aren't destroyed.
00:32:13:00 - 00:32:14:13
But because of the great
00:32:14:13 - 00:32:15:08
the big war,
00:32:15:08 - 00:32:18:05
you have to abandon those operations.
00:32:18:05 - 00:32:19:09
But normally to get a claim
00:32:19:09 - 00:32:20:11
paid for forced abandonment,
00:32:20:11 - 00:32:22:10
you have to abandon the operations
00:32:22:10 - 00:32:23:24
for a minimum of six months,
00:32:23:24 - 00:32:25:15
and it has to be a permanent abandonment.
00:32:25:15 - 00:32:27:13
And then the insurers will pay the
00:32:27:13 - 00:32:28:04
the value
00:32:28:04 - 00:32:31:04
of the investment that that has been,
00:32:31:04 - 00:32:32:12
walked away from.
00:32:32:12 - 00:32:32:24
But in fact,
00:32:32:24 - 00:32:34:03
what generally happens
00:32:34:03 - 00:32:35:12
is that the abandonment doesn't
00:32:35:12 - 00:32:37:01
last for forever,
00:32:37:01 - 00:32:38:12
and the insured can go back
00:32:38:12 - 00:32:40:17
and reclaim the assets.
00:32:40:17 - 00:32:41:19
and resume production.
00:32:41:19 - 00:32:42:24
So therefore the loss
00:32:42:24 - 00:32:43:20
is really essentially
00:32:43:20 - 00:32:45:04
a business interruption loss.
00:32:45:04 - 00:32:46:19
And we cover that at Opito.
00:32:46:19 - 00:32:49:13
So I've always been trying
00:32:49:13 - 00:32:50:15
to push the boundaries
00:32:50:15 - 00:32:51:17
of the political risk product
00:32:51:17 - 00:32:53:12
so that it does include perils
00:32:53:12 - 00:32:54:19
like business interruption
00:32:54:19 - 00:32:56:01
more widely than,
00:32:56:01 - 00:32:57:00
than perhaps the market
00:32:57:00 - 00:32:57:23
is comfortable to do.
00:32:57:23 - 00:32:58:19
And I think it's something
00:32:58:19 - 00:33:00:22
that that needs to be dealt with.
00:33:00:22 - 00:33:02:13
It's always the case that,
00:33:03:17 - 00:33:05:20
that new situations,
00:33:05:20 - 00:33:07:04
and certainly,
00:33:07:04 - 00:33:08:18
a land war,
00:33:08:18 - 00:33:09:17
significant scale land
00:33:09:17 - 00:33:12:00
war in Europe is, is a situation
00:33:12:00 - 00:33:13:20
we haven't seen for a long time.
00:33:13:20 - 00:33:15:12
Challenge the insurance,
00:33:15:12 - 00:33:16:19
new situations, challenge
00:33:16:19 - 00:33:18:06
the insurance products.
00:33:18:06 - 00:33:20:22
I think just staying on BI for a second
00:33:20:22 - 00:33:22:15
something that,
00:33:22:15 - 00:33:23:21
I think the market has seen.
00:33:23:21 - 00:33:25:19
And you may be able to,
00:33:25:19 - 00:33:28:12
comment on this Olena and Igor.
00:33:28:12 - 00:33:30:01
Is that,
00:33:30:01 - 00:33:30:23
the business interruption
00:33:30:23 - 00:33:33:01
is triggered by physical damage
00:33:33:01 - 00:33:36:01
and where the war sweeps past,
00:33:36:22 - 00:33:39:22
let's say, an energy plant or,
00:33:40:01 - 00:33:43:01
a turbine plant, or,
00:33:43:10 - 00:33:44:22
a grain storage facility
00:33:44:22 - 00:33:46:14
or something like that,
00:33:46:14 - 00:33:49:10
that it isn't necessarily damaged.
00:33:49:10 - 00:33:52:10
It just can't function because,
00:33:52:12 - 00:33:54:17
it's occupied by,
00:33:54:17 - 00:33:56:00
Russian soldiers.
00:33:58:15 - 00:33:59:18
there's a clear loss going
00:33:59:18 - 00:34:00:22
on, but it's difficult
00:34:00:22 - 00:34:01:22
to identify the trigger
00:34:01:22 - 00:34:03:13
for the business interruption.
00:34:03:13 - 00:34:04:16
I just briefly or equally,
00:34:04:16 - 00:34:06:12
just to finish, on that,
00:34:06:12 - 00:34:08:11
there may have been some action
00:34:08:11 - 00:34:10:02
around these.
00:34:10:02 - 00:34:12:04
The energy plant.
00:34:12:04 - 00:34:14:05
I'm giving these as an example.
00:34:14:05 - 00:34:16:22
They may be able to identify,
00:34:16:22 - 00:34:18:12
some damage to the plant.
00:34:20:04 - 00:34:21:13
but if it's not a significant
00:34:21:13 - 00:34:22:24
part of the plant's damage,
00:34:22:24 - 00:34:23:08
if the
00:34:23:08 - 00:34:24:06
if that damage doesn't
00:34:24:06 - 00:34:26:09
actually stop production,
00:34:26:09 - 00:34:27:00
then it's difficult
00:34:27:00 - 00:34:28:01
to say that the business
00:34:28:01 - 00:34:28:14
that the
00:34:28:14 - 00:34:32:13
damage has caused
00:34:32:13 - 00:34:33:22
the the business interruption
00:34:33:22 - 00:34:34:18
because the damage
00:34:34:18 - 00:34:37:13
isn't actually causing,
00:34:37:13 - 00:34:38:21
the plant to stop working.
00:34:38:21 - 00:34:39:23
It's the occupation
00:34:39:23 - 00:34:42:05
that's causing this plant stop working.
00:34:42:05 - 00:34:44:09
So that's that relationship between
00:34:44:09 - 00:34:45:14
firstly you need damage.
00:34:45:14 - 00:34:45:24
Secondly,
00:34:45:24 - 00:34:49:17
you need the damage to cause the BI has
00:34:49:19 - 00:34:52:19
has produced some problems in
00:34:52:22 - 00:34:54:07
examples in Ukraine.
00:34:54:07 - 00:34:56:01
But before Olena comes in on that,
00:34:56:01 - 00:34:58:00
I know you wanted to Olena to comment on that.
00:34:58:00 - 00:35:00:21
Like, if I just make one other point,
00:35:00:21 - 00:35:02:03
I think that the political risk
00:35:02:03 - 00:35:04:02
product needs to cover non damage BI
00:35:04:02 - 00:35:05:12
and we did do that Optio.
00:35:05:12 - 00:35:06:20
We had business
00:35:06:20 - 00:35:08:15
interruption arising from forced upon.
00:35:08:15 - 00:35:10:11
But I think the blockade situations
00:35:10:11 - 00:35:12:10
Alena has spoken to me about in the past,
00:35:12:10 - 00:35:12:23
you know, there hasn't
00:35:12:23 - 00:35:14:15
been any physical damage,
00:35:14:15 - 00:35:15:17
but there is a significant
00:35:15:17 - 00:35:16:17
business interruption.
00:35:16:17 - 00:35:17:18
So I think
00:35:17:18 - 00:35:20:09
in the context of political risks,
00:35:20:09 - 00:35:22:04
I think the market needs to look at,
00:35:23:19 - 00:35:25:11
the whole question of non damage BI,
00:35:25:11 - 00:35:27:17
because I think that the non damage BI
00:35:27:17 - 00:35:29:01
is just as prevalent,
00:35:29:01 - 00:35:30:08
just as important as,
00:35:30:08 - 00:35:31:16
as physical damage
00:35:31:16 - 00:35:34:10
resulting in BI, the market.
00:35:34:10 - 00:35:35:21
the broad market of course
00:35:35:21 - 00:35:37:18
has been extremely focused on non damage
00:35:37:18 - 00:35:40:13
BI because that was the
00:35:40:13 - 00:35:41:14
that was at the core of
00:35:41:14 - 00:35:43:00
of the Covid losses
00:35:43:00 - 00:35:45:10
throughout the UK.
00:35:45:10 - 00:35:46:16
So that certainly their mind
00:35:46:16 - 00:35:47:20
is working on that.
00:35:47:20 - 00:35:49:10
And absolutely we should see
00:35:49:10 - 00:35:51:11
whether it applies to other classes.
00:35:51:11 - 00:35:52:04
Olena and Igor
00:35:52:04 - 00:35:53:21
do you have any comments on that?
00:35:53:21 - 00:35:56:21
I actually wanted to ask you a question.
00:35:58:11 - 00:36:00:05
when you speak about this,
00:36:00:05 - 00:36:03:01
non damage related business interruption,
00:36:03:01 - 00:36:06:10
this all sounds so exotic and unheard of,
00:36:06:10 - 00:36:08:03
but I think that,
00:36:08:03 - 00:36:10:12
as you rightly said, about Covid, right?
00:36:10:12 - 00:36:14:00
We are living among the, exotic events
00:36:14:21 - 00:36:16:12
and, nothing like
00:36:16:12 - 00:36:18:05
this had happened before. So,
00:36:19:24 - 00:36:21:21
can you think about any examples
00:36:21:21 - 00:36:23:09
or maybe in your past experience
00:36:23:09 - 00:36:24:13
when you've seen something
00:36:24:13 - 00:36:26:05
like this being applied,
00:36:26:05 - 00:36:28:00
being developed in some countries
00:36:28:00 - 00:36:29:24
affected by,
00:36:29:24 - 00:36:32:07
I don't know, diseases or wars
00:36:32:07 - 00:36:34:00
or some political event?
00:36:34:00 - 00:36:36:21
Well, it's not,
00:36:36:21 - 00:36:37:17
Nick will correct me,
00:36:37:17 - 00:36:38:11
he has a far deeper
00:36:38:11 - 00:36:40:14
understanding of the market than I do,
00:36:40:14 - 00:36:43:14
as I'm a mere lawyer, but,
00:36:44:03 - 00:36:45:13
an example of
00:36:45:13 - 00:36:46:12
I haven't seen
00:36:46:12 - 00:36:48:01
a lot of examples of non damage
00:36:48:01 - 00:36:51:01
by in the, in the sort of political risk
00:36:52:00 - 00:36:53:02
context.
00:36:53:02 - 00:36:56:02
But a classic sort of example would be
00:36:56:06 - 00:36:59:04
if there is,
00:36:59:04 - 00:37:00:05
if there is something
00:37:00:05 - 00:37:01:17
which is preventing the business
00:37:01:17 - 00:37:04:00
from functioning
00:37:04:00 - 00:37:06:11
and that something may be,
00:37:06:11 - 00:37:08:18
a denial of access to the business.
00:37:08:18 - 00:37:11:03
So,
00:37:11:03 - 00:37:14:09
a lot of hotels in,
00:37:15:03 - 00:37:16:11
the Gulf of Mexico
00:37:16:11 - 00:37:17:23
region take out
00:37:17:23 - 00:37:20:12
non have non damage BI cover.
00:37:20:12 - 00:37:22:10
I think it's often called for example
00:37:22:10 - 00:37:23:17
a denial of access cover.
00:37:25:02 - 00:37:25:19
In order to
00:37:25:19 - 00:37:26:12
prevent againest a
00:37:26:12 - 00:37:27:17
situation where they are
00:37:27:17 - 00:37:29:21
not themselves damaged
00:37:29:21 - 00:37:31:04
by let's say, a hurricane,
00:37:31:04 - 00:37:33:20
but there's a shutdown
00:37:33:20 - 00:37:36:16
and nobody can enter the town
00:37:36:16 - 00:37:39:04
or you can't get to the town.
00:37:39:04 - 00:37:40:18
So that might cover
00:37:40:18 - 00:37:43:10
things like hurricanes and floods.
00:37:43:10 - 00:37:45:10
You've also,
00:37:45:10 - 00:37:46:19
following,
00:37:46:19 - 00:37:49:22
SaaS outbreaks, in Asia pre-COVID,
00:37:49:22 - 00:37:53:20
you had some, covers which, prevented,
00:37:55:00 - 00:37:56:21
sorry, which, which provided cover
00:37:56:21 - 00:37:59:02
for customers
00:37:59:02 - 00:37:59:18
being prevented
00:37:59:18 - 00:38:01:09
from coming to the business.
00:38:01:09 - 00:38:04:09
And there is some cover out there if,
00:38:04:10 - 00:38:07:10
reputationally people
00:38:07:11 - 00:38:08:08
are turned away
00:38:08:08 - 00:38:11:06
from coming to a particular place.
00:38:11:06 - 00:38:14:03
So that's the sort of non damage BI
00:38:14:03 - 00:38:17:03
has tended to be around
00:38:18:02 - 00:38:20:15
businesses which attract customers
00:38:20:15 - 00:38:22:22
which require footfall.
00:38:22:22 - 00:38:25:07
And that stops
00:38:25:07 - 00:38:27:09
in fact, it may actually
00:38:27:09 - 00:38:28:10
also cover
00:38:30:18 - 00:38:33:09
energy plants,
00:38:33:09 - 00:38:35:24
and those sorts of production units
00:38:35:24 - 00:38:38:06
that require workers to arrive
00:38:38:06 - 00:38:40:22
if they, if they can't arrive
00:38:40:22 - 00:38:43:07
and do the work.
00:38:43:07 - 00:38:45:11
But I haven't personally dealt
00:38:45:11 - 00:38:47:24
with one of those, so we would,
00:38:47:24 - 00:38:48:23
we could look into that,
00:38:48:23 - 00:38:52:04
but I haven't seen it in a political risk context
00:38:52:04 - 00:38:52:12
Okay.
00:38:52:12 - 00:38:54:22
We've just been talking about the,
00:38:54:22 - 00:38:55:23
potential difficulties
00:38:55:23 - 00:38:56:18
with provision
00:38:56:18 - 00:38:59:18
of business interruption insurance.
00:38:59:23 - 00:39:01:14
in the political violence,
00:39:01:14 - 00:39:04:01
political risk context.
00:39:04:01 - 00:39:05:12
I just wondered,
00:39:05:12 - 00:39:06:05
Olena and Igor
00:39:06:05 - 00:39:07:09
or whether, you know,
00:39:07:09 - 00:39:09:11
or what you have seen
00:39:09:11 - 00:39:12:11
with regard to the payment of,
00:39:12:17 - 00:39:15:21
political violence claims in Ukraine and
00:39:17:00 - 00:39:18:15
what, if any, difficulties
00:39:18:15 - 00:39:21:24
you have observed, with those payments?
00:39:23:02 - 00:39:25:01
Basically, in our experience
00:39:25:01 - 00:39:28:00
in the early days of the invasion
00:39:28:00 - 00:39:30:17
the insurance and reinsurance companies
00:39:30:17 - 00:39:33:13
didn't rush to pay out
00:39:33:13 - 00:39:37:13
the compensation and the, basically,
00:39:39:07 - 00:39:41:06
most of them decided to wait
00:39:41:06 - 00:39:44:06
and see how the war develops.
00:39:45:00 - 00:39:46:18
And I think that the key reason for
00:39:46:18 - 00:39:48:12
that was that at that moment,
00:39:48:12 - 00:39:49:22
no one was sure
00:39:49:22 - 00:39:50:21
what is going
00:39:50:21 - 00:39:53:06
what's going to happen next.
00:39:53:06 - 00:39:55:14
And you know, some of our guys,
00:39:55:14 - 00:39:58:18
they lost assets because those assets
00:39:58:18 - 00:40:01:18
were occupied by the Russian military.
00:40:01:24 - 00:40:04:02
And they claimed,
00:40:04:02 - 00:40:06:03
they make a claim to the insurance
00:40:06:03 - 00:40:07:11
and reinsurance companies
00:40:07:11 - 00:40:09:13
to compensate for those,
00:40:09:13 - 00:40:11:02
for those assets.
00:40:11:02 - 00:40:12:20
But I think that the reinsurers
00:40:12:20 - 00:40:14:20
and insurers were not sure
00:40:14:20 - 00:40:16:10
if the companies wouldn't
00:40:16:10 - 00:40:17:00
be able
00:40:17:00 - 00:40:20:00
to get control over their assets
00:40:20:00 - 00:40:22:01
as a result of the country offensive.
00:40:22:01 - 00:40:22:22
Yes.
00:40:22:22 - 00:40:25:22
And therefore the they didn't actually,
00:40:25:22 - 00:40:28:22
pay the compensation but decided to wait.
00:40:28:22 - 00:40:31:22
And as far as I know, not all of the,
00:40:32:10 - 00:40:35:12
insurance claims have been yet paid
00:40:35:12 - 00:40:37:22
by the insurance companies
00:40:37:22 - 00:40:39:20
because a lot of them, they really,
00:40:40:21 - 00:40:41:24
look into the
00:40:41:24 - 00:40:43:19
documentation of the damages.
00:40:43:19 - 00:40:46:19
They, struggle with confirming,
00:40:47:12 - 00:40:49:18
you know, all these,
00:40:49:18 - 00:40:51:11
damages caused to the property
00:40:51:11 - 00:40:52:22
because there is no access
00:40:52:22 - 00:40:53:24
basically to the side.
00:40:53:24 - 00:40:54:11
There is not
00:40:54:11 - 00:40:57:11
no access to the projects, etc.
00:40:57:11 - 00:40:59:17
so I would say that that partially
00:40:59:17 - 00:41:01:20
that the claims of our clients
00:41:01:20 - 00:41:03:00
were settled
00:41:03:00 - 00:41:04:02
by the insurance
00:41:04:02 - 00:41:07:02
and reinsurance companies, but most,
00:41:07:04 - 00:41:08:18
in relation to the projects
00:41:08:18 - 00:41:11:09
where the foreign lenders were involved,
00:41:11:09 - 00:41:14:01
you know, usually,
00:41:14:01 - 00:41:15:18
the lenders, they take security
00:41:15:18 - 00:41:18:18
over the insurance and reinsurance policy
00:41:18:23 - 00:41:21:03
and they have a leverage over
00:41:21:03 - 00:41:23:03
the insurance companies
00:41:23:03 - 00:41:26:00
and when the borrowers, our clients,
00:41:26:00 - 00:41:29:00
received a full support from the lenders,
00:41:29:13 - 00:41:31:14
they were able to get paid.
00:41:31:14 - 00:41:32:12
But some of the clients
00:41:32:12 - 00:41:33:00
they still
00:41:33:00 - 00:41:35:06
wait for their claims to be settled
00:41:35:06 - 00:41:36:20
by the insurance companies
00:41:36:20 - 00:41:38:06
when talking about insurance
00:41:38:06 - 00:41:38:23
and reinsurance,
00:41:38:23 - 00:41:40:23
because usually the Ukrainian companies,
00:41:40:23 - 00:41:43:12
they just take 1% of the risk
00:41:43:12 - 00:41:44:19
and the rest of the risk
00:41:44:19 - 00:41:46:12
related to the project,
00:41:46:12 - 00:41:50:01
is re insured by the foreign reinsurance companies.
00:41:52:00 - 00:41:53:01
So,
00:41:53:01 - 00:41:54:15
foreign reinsurance companies,
00:41:54:15 - 00:41:57:00
you're saying have been
00:41:57:00 - 00:42:00:00
asking for, proof of damage,
00:42:00:05 - 00:42:00:20
which of course
00:42:00:20 - 00:42:02:06
is very difficult to prove
00:42:02:06 - 00:42:03:11
because you can't get adjusters
00:42:03:11 - 00:42:05:24
in there and photographs and so on.
00:42:05:24 - 00:42:08:11
Yes. And that's true.
00:42:08:11 - 00:42:11:11
And I think that but where we served,
00:42:11:16 - 00:42:12:20
we assisted a lot
00:42:12:20 - 00:42:15:03
our clients in collecting,
00:42:15:03 - 00:42:17:20
the evidence, of the damages
00:42:17:20 - 00:42:20:20
caused by the war, by the,
00:42:21:12 - 00:42:24:12
actually, military conflict.
00:42:25:13 - 00:42:27:05
And I think we,
00:42:27:05 - 00:42:28:12
we tried to document
00:42:28:12 - 00:42:30:04
it as detailed as possible,
00:42:30:04 - 00:42:32:00
and we used everything we could,
00:42:32:00 - 00:42:35:06
so photos, videos, even those which are,
00:42:35:22 - 00:42:38:22
in the public, domains, for example,
00:42:41:12 - 00:42:44:00
all kind of documentary, videos
00:42:44:00 - 00:42:47:00
and photo damages, you're actually,
00:42:48:12 - 00:42:50:11
I think what was used by our clients
00:42:50:11 - 00:42:52:12
in order to prove,
00:42:52:12 - 00:42:53:15
to prove,
00:42:53:15 - 00:42:55:12
that the property was damaged.
00:42:56:11 - 00:42:56:21
Okay.
00:42:56:21 - 00:42:58:19
So, Igor, are you seeing,
00:42:58:19 - 00:43:02:06
insurance companies, foreign reinsurers
00:43:02:06 - 00:43:03:20
being prepared to accept,
00:43:05:19 - 00:43:07:09
that there is damage
00:43:07:09 - 00:43:10:03
without necessarily visual proof.
00:43:10:03 - 00:43:13:20
If the loss is occurring
00:43:14:24 - 00:43:17:24
in or near the
00:43:18:04 - 00:43:21:04
the battle zone, the battle front.
00:43:21:09 - 00:43:24:14
Yeah. I think that is the case because,
00:43:25:01 - 00:43:27:01
still, the clients were required
00:43:27:01 - 00:43:27:17
to provide
00:43:27:17 - 00:43:28:19
some evidence
00:43:28:19 - 00:43:31:19
or confirmation that the damage
00:43:31:21 - 00:43:34:21
was caused to the property.
00:43:34:23 - 00:43:37:23
but basically, basically, yes.
00:43:38:18 - 00:43:40:09
you know,
00:43:40:09 - 00:43:41:18
the insurance companies
00:43:41:18 - 00:43:44:03
were very supportive
00:43:44:03 - 00:43:45:16
and reinsurers actually,
00:43:45:16 - 00:43:47:15
and they accepted claims even
00:43:47:15 - 00:43:49:05
without the sufficient
00:43:49:05 - 00:43:51:12
evidence of damage.
00:43:51:12 - 00:43:52:11
That's
00:43:52:11 - 00:43:53:01
that's clear,
00:43:53:01 - 00:43:54:07
because at that moment
00:43:54:07 - 00:43:57:02
it was really impossible.
00:43:57:02 - 00:43:58:07
It and it was,
00:43:58:07 - 00:43:58:15
you know,
00:43:58:15 - 00:44:00:05
unfeasible for the companies
00:44:00:05 - 00:44:01:19
to collect necessary damages.
00:44:01:19 - 00:44:04:00
You can't send people on the side
00:44:04:00 - 00:44:06:00
in order to make photo
00:44:06:00 - 00:44:07:13
in order to document,
00:44:08:24 - 00:44:10:11
and probably some
00:44:10:11 - 00:44:11:02
of the companies
00:44:11:02 - 00:44:12:18
managed to do that,
00:44:12:18 - 00:44:14:05
but some
00:44:14:05 - 00:44:17:05
but some were completely, you know,
00:44:18:04 - 00:44:18:17
but for some
00:44:18:17 - 00:44:20:12
it was completely impossible.
00:44:20:12 - 00:44:20:20
Yes.
00:44:20:20 - 00:44:23:20
Basically such claims were accepted.
00:44:24:24 - 00:44:26:12
Well, this no, no,
00:44:26:12 - 00:44:27:21
those claims were not questioned
00:44:27:21 - 00:44:31:01
based on the lack of proof of damage.
00:44:32:15 - 00:44:34:03
You know, what's interesting,
00:44:34:03 - 00:44:35:08
on the one hand,
00:44:35:08 - 00:44:36:02
all insurance
00:44:36:02 - 00:44:38:00
companies are regulated, right?
00:44:38:00 - 00:44:40:14
So the next day, the regulator could come
00:44:40:14 - 00:44:42:08
and penalise them for,
00:44:42:08 - 00:44:43:09
for paying something
00:44:43:09 - 00:44:45:04
without the evidence.
00:44:45:04 - 00:44:48:04
On the other hand, it's all negotiable.
00:44:48:14 - 00:44:50:05
So there is a contract.
00:44:50:05 - 00:44:52:04
There is some room for negotiation.
00:44:52:04 - 00:44:53:20
And, I'm actually wondering
00:44:53:20 - 00:44:54:23
how it's dealt with
00:44:54:23 - 00:44:56:21
in London, on the London market,
00:44:56:21 - 00:44:58:07
whether the insurers
00:44:58:07 - 00:45:00:14
are able to accept the claims
00:45:00:14 - 00:45:02:12
that are not
00:45:02:12 - 00:45:03:20
but are not fully evidenced
00:45:03:20 - 00:45:05:24
by documents, photos and so fourth.
00:45:05:24 - 00:45:07:04
Is it,
00:45:07:04 - 00:45:09:23
something carved in stone or
00:45:09:23 - 00:45:10:18
typically not?
00:45:11:24 - 00:45:14:20
Well, perhaps I can take that point.
00:45:14:20 - 00:45:16:16
I spoken to a number of loss
00:45:16:16 - 00:45:18:02
adjusters in recent days
00:45:18:02 - 00:45:19:02
about how they've managed
00:45:19:02 - 00:45:20:03
to adjust
00:45:20:03 - 00:45:21:02
political violence,
00:45:21:02 - 00:45:23:12
physical damage, losses in Ukraine.
00:45:23:12 - 00:45:25:00
And it's,
00:45:25:00 - 00:45:25:06
you know,
00:45:25:06 - 00:45:26:15
they have to take a pragmatic view.
00:45:26:15 - 00:45:29:07
Satellite imagery is helpful,
00:45:29:07 - 00:45:30:23
that that will demonstrate
00:45:30:23 - 00:45:32:09
whether the assets are damaged
00:45:32:09 - 00:45:34:02
or not quite easily.
00:45:34:02 - 00:45:35:21
And I think just that amount of goodwill
00:45:35:21 - 00:45:36:11
on both sides,
00:45:36:11 - 00:45:38:07
there has to be some understanding that,
00:45:38:07 - 00:45:38:18
you know,
00:45:38:18 - 00:45:41:00
the normal standards of loss adjusting
00:45:41:00 - 00:45:41:09
just aren't
00:45:41:09 - 00:45:42:20
going to be possible in a war zone.
00:45:42:20 - 00:45:45:20
So I haven't heard of any situations
00:45:45:20 - 00:45:46:22
in London
00:45:46:22 - 00:45:49:19
where legitimate claims have been held up
00:45:49:19 - 00:45:52:01
because the loss adjusters were not able
00:45:52:01 - 00:45:53:24
to get satisfactory
00:45:53:24 - 00:45:55:01
evidence about the
00:45:55:01 - 00:45:56:12
the nature of the physical damage.
00:45:56:12 - 00:45:58:01
I don't think it's been a problem.
00:45:58:01 - 00:45:58:22
I think
00:45:58:22 - 00:46:00:02
adjusters and underwriters
00:46:00:02 - 00:46:02:21
have been quite pragmatic.
00:46:02:21 - 00:46:04:08
I don't see it being a problem.
00:46:04:08 - 00:46:06:05
I don't think it has been a problem.
00:46:06:05 - 00:46:07:10
I would agree with that.
00:46:07:10 - 00:46:10:04
And I think where.
00:46:10:04 - 00:46:11:12
So firstly, there is no,
00:46:12:16 - 00:46:14:18
regulatory requirement on insurers.
00:46:14:18 - 00:46:15:07
It's very much
00:46:15:07 - 00:46:16:19
at the discretion of insurers
00:46:16:19 - 00:46:19:19
to when and how they pay a claim.
00:46:20:19 - 00:46:23:20
I have seen insurers paying claims
00:46:24:01 - 00:46:27:09
without the usual, adjustment evidence.
00:46:28:09 - 00:46:31:09
where the things get more difficult is,
00:46:31:17 - 00:46:34:16
where losses are further to the West, or,
00:46:34:16 - 00:46:36:20
if there is a list of losses
00:46:36:20 - 00:46:38:09
coming through from an insured
00:46:38:09 - 00:46:40:01
and it's not clear
00:46:40:01 - 00:46:41:02
where those losses are,
00:46:41:02 - 00:46:43:07
and some of them may be near Lviv,
00:46:43:07 - 00:46:45:12
for example,
00:46:45:12 - 00:46:47:18
the ones that are near,
00:46:47:18 - 00:46:49:06
the Eastern Front,
00:46:49:06 - 00:46:50:17
generally speaking,
00:46:50:17 - 00:46:51:17
have not been questioned
00:46:51:17 - 00:46:52:16
as far as I can see.
00:46:52:16 - 00:46:55:07
But the ones that are further out,
00:46:55:07 - 00:46:57:12
require some at least commentary
00:46:57:12 - 00:46:58:20
on how they were damaged
00:46:58:20 - 00:47:01:05
and where they were damaged.
00:47:01:05 - 00:47:03:02
I think in the London market
00:47:03:02 - 00:47:05:18
and international markets, the,
00:47:05:18 - 00:47:06:16
probably the,
00:47:07:19 - 00:47:09:10
the main issue with
00:47:09:10 - 00:47:11:15
affecting the discretion of insurers is,
00:47:11:15 - 00:47:12:10
of course, most,
00:47:12:10 - 00:47:14:09
most of this is, is fairly
00:47:14:09 - 00:47:17:05
heavily re insured.
00:47:17:05 - 00:47:18:20
so insurers
00:47:18:20 - 00:47:19:20
have to act,
00:47:22:09 - 00:47:24:16
with an eye on being able
00:47:24:16 - 00:47:26:12
to show reinsurers
00:47:26:12 - 00:47:28:01
that, the losses
00:47:28:01 - 00:47:29:18
they're paying out are covered,
00:47:29:18 - 00:47:31:16
or at the very least, bringing,
00:47:31:16 - 00:47:33:10
making sure they're bringing reinsurers
00:47:33:10 - 00:47:35:18
along with them,
00:47:35:18 - 00:47:37:24
on the, on the adjustment path.
00:47:37:24 - 00:47:38:10
And that's
00:47:38:10 - 00:47:39:17
really the main thing
00:47:39:17 - 00:47:41:15
that affects insurers actions
00:47:41:15 - 00:47:43:18
and affects their discretion.
00:47:43:18 - 00:47:45:08
It's probably a good opportunity,
00:47:45:08 - 00:47:45:23
as we talked
00:47:45:23 - 00:47:48:23
about that, to ask Nick, if you,
00:47:49:24 - 00:47:52:24
you know, what what challenges you see,
00:47:53:09 - 00:47:56:11
the war in Ukraine has,
00:47:56:24 - 00:47:59:24
presented to the market and what how that
00:48:00:11 - 00:48:02:15
how you think that may affect the product
00:48:02:15 - 00:48:05:00
or the development of the products,
00:48:05:00 - 00:48:05:08
right?
00:48:05:08 - 00:48:07:03
I don't think it's just Ukraine.
00:48:07:03 - 00:48:10:04
I think we there have been three loss
00:48:10:04 - 00:48:11:22
situations in recent years
00:48:11:22 - 00:48:13:21
that have shown a spotlight
00:48:13:21 - 00:48:14:24
on the efficacy
00:48:14:24 - 00:48:17:08
of the PV and the PRI products,
00:48:17:08 - 00:48:20:04
Afghanistan being one, Russia
00:48:20:04 - 00:48:21:19
being another, and Ukraine
00:48:21:19 - 00:48:24:02
being being the final one.
00:48:24:02 - 00:48:26:12
I think it's important to remember that
00:48:26:12 - 00:48:27:23
the standard PRI product
00:48:27:23 - 00:48:30:05
has its origins in a 1981 form.
00:48:30:05 - 00:48:31:19
So it's a very old,
00:48:31:19 - 00:48:33:05
very well-established product,
00:48:33:05 - 00:48:34:24
but it was designed
00:48:34:24 - 00:48:37:00
to cover this, 1980s style
00:48:37:00 - 00:48:39:02
snatch and grab expropriations,
00:48:39:02 - 00:48:41:04
where the government of Peru seized
00:48:41:04 - 00:48:42:23
American oil assets.
00:48:42:23 - 00:48:44:03
I don't think it's kept pace
00:48:44:03 - 00:48:46:04
very satisfactorily with
00:48:46:04 - 00:48:46:21
this sort of more
00:48:46:21 - 00:48:49:13
disingenuous ways that governments
00:48:49:13 - 00:48:50:18
tend to act nowadays,
00:48:50:18 - 00:48:51:19
if they want foreigners
00:48:51:19 - 00:48:53:12
out of their economy.
00:48:53:12 - 00:48:54:19
So I think the first
00:48:54:19 - 00:48:56:03
problem is I think that,
00:48:57:14 - 00:48:58:04
more thought
00:48:58:04 - 00:48:58:15
needs to be
00:48:58:15 - 00:49:01:15
given to bringing the product up to date.
00:49:01:22 - 00:49:03:07
I think a second problem
00:49:03:07 - 00:49:04:16
that we've seen is in
00:49:04:16 - 00:49:07:00
in the political violence area
00:49:07:00 - 00:49:08:24
where companies go for the cheap option,
00:49:08:24 - 00:49:09:18
which is just to buy
00:49:09:18 - 00:49:11:01
a political violence policy
00:49:11:01 - 00:49:13:10
rather than political risk.
00:49:13:10 - 00:49:15:20
They're frequently surprised when,
00:49:15:20 - 00:49:17:03
because of political violence,
00:49:17:03 - 00:49:18:20
they have to abandon their assets
00:49:18:20 - 00:49:19:17
and they submit a claim.
00:49:19:17 - 00:49:21:09
And the claim isn't honoured
00:49:21:09 - 00:49:22:19
because there's a requirement
00:49:22:19 - 00:49:24:20
that the assets have to be
00:49:24:20 - 00:49:27:17
destroyed or damaged.
00:49:27:17 - 00:49:28:12
But the wordings
00:49:28:12 - 00:49:30:05
perhaps aren't as clear on that point
00:49:30:05 - 00:49:30:21
as they want to.
00:49:30:21 - 00:49:32:16
I know I'm aware of a number of coverage
00:49:32:16 - 00:49:34:08
disputes,
00:49:34:08 - 00:49:36:11
centering on,
00:49:36:11 - 00:49:39:08
abandonment rather than physical loss or
00:49:39:08 - 00:49:40:18
physical damage.
00:49:40:18 - 00:49:42:11
So that's an that that's another problem.
00:49:44:02 - 00:49:44:12
so my
00:49:44:12 - 00:49:45:24
general, my general
00:49:45:24 - 00:49:47:13
takeaway from all of this
00:49:47:13 - 00:49:48:04
and so sorry,
00:49:48:04 - 00:49:48:16
I think
00:49:48:16 - 00:49:51:16
in the issue in Russia where we've seen
00:49:51:18 - 00:49:52:20
companies
00:49:52:20 - 00:49:54:17
having to abandon their operations,
00:49:54:17 - 00:49:56:11
not because they've been ordered to do so
00:49:56:11 - 00:49:57:02
well, not because
00:49:57:02 - 00:49:58:05
of any sort of
00:49:58:05 - 00:49:59:15
imminent threat to human life,
00:49:59:15 - 00:50:01:03
but just for commercial
00:50:01:03 - 00:50:02:06
reputational reasons.
00:50:02:06 - 00:50:03:15
It's essential to do so.
00:50:03:15 - 00:50:04:01
And again,
00:50:04:01 - 00:50:05:10
that isn't obviously covered
00:50:05:10 - 00:50:06:15
under a political risk policy.
00:50:06:15 - 00:50:10:07
So combination of voluntary divestiture,
00:50:10:19 - 00:50:12:23
when the political climate becomes
00:50:12:23 - 00:50:14:03
too hot to handle
00:50:14:03 - 00:50:17:03
and reputational issues crop up,
00:50:17:24 - 00:50:20:23
abandonment rather than physical damage,
00:50:20:23 - 00:50:22:03
business interruption
00:50:22:03 - 00:50:25:03
and non damage, business interruption.
00:50:25:09 - 00:50:26:15
There are a number of issues,
00:50:26:15 - 00:50:29:03
I think, that have come to light
00:50:29:03 - 00:50:30:08
over the efficacy
00:50:30:08 - 00:50:31:16
of the political risk product
00:50:31:16 - 00:50:32:13
and to a lesser extent,
00:50:32:13 - 00:50:33:09
the political violence
00:50:33:09 - 00:50:36:02
politic over the last 4 or 5 years.
00:50:36:02 - 00:50:36:17
And I think this is
00:50:36:17 - 00:50:39:05
because the market has been
00:50:39:05 - 00:50:40:13
focused almost entirely
00:50:40:13 - 00:50:42:19
on insuring bank loans
00:50:42:19 - 00:50:45:07
for the last 15 years, and they've really
00:50:45:07 - 00:50:47:06
tended to sort of push to one side
00:50:47:06 - 00:50:48:11
the traditional political
00:50:48:11 - 00:50:50:03
risk product for corporate clients
00:50:50:03 - 00:50:51:19
rather than financial institutions,
00:50:52:19 - 00:50:53:05
whereas a
00:50:53:05 - 00:50:54:17
huge amount of work
00:50:54:17 - 00:50:57:17
has gone into updating the bank product
00:50:58:00 - 00:50:59:13
range in Basel two,
00:50:59:13 - 00:51:01:00
Basel three and out Basel four.
00:51:01:00 - 00:51:02:01
So you have,
00:51:02:01 - 00:51:02:08
you know,
00:51:02:08 - 00:51:03:23
a really watertight guarantee
00:51:03:23 - 00:51:05:06
and that was demonstrated
00:51:05:06 - 00:51:06:18
very clearly in the way
00:51:06:18 - 00:51:07:13
the market paid
00:51:07:13 - 00:51:08:20
or the nonpayment claims
00:51:08:20 - 00:51:10:23
following the Ghanian sovereign
00:51:10:23 - 00:51:12:11
default recently.
00:51:12:11 - 00:51:13:16
But set against that,
00:51:13:16 - 00:51:15:00
you've got the political risk
00:51:15:00 - 00:51:16:02
product for corporate sorts,
00:51:16:02 - 00:51:18:09
where not much attention has been given
00:51:18:09 - 00:51:20:06
to bringing the product up to date,
00:51:20:06 - 00:51:23:03
making it, more of a watertight guarantee
00:51:23:03 - 00:51:23:21
when things go wrong.
00:51:23:21 - 00:51:26:19
And I think looking to the future,
00:51:26:19 - 00:51:28:05
when the war is over
00:51:28:05 - 00:51:29:09
and reconstruction
00:51:29:09 - 00:51:31:10
of Ukraine starts and foreigners
00:51:31:10 - 00:51:32:04
hopefully,
00:51:32:04 - 00:51:33:23
you know, surge back into the country
00:51:33:23 - 00:51:35:03
wanting to fund
00:51:35:03 - 00:51:36:19
infrastructure developments,
00:51:36:19 - 00:51:38:03
I think they're going to be looking for,
00:51:39:17 - 00:51:41:07
an improved product rather
00:51:41:07 - 00:51:41:24
relative to what
00:51:41:24 - 00:51:43:03
they're being given today.
00:51:43:03 - 00:51:45:12
I don't think the product really
00:51:45:12 - 00:51:47:22
is as fit for purpose as it needs to be.
00:51:49:07 - 00:51:49:22
That's interesting.
00:51:49:22 - 00:51:51:01
And I think from a
00:51:51:01 - 00:51:54:01
from a lawyer's perspective,
00:51:55:19 - 00:51:58:03
from the perspective of the market,
00:51:58:03 - 00:51:59:06
it's always difficult
00:51:59:06 - 00:52:00:02
when you have a cover
00:52:00:02 - 00:52:03:02
which is triggered by specific perils
00:52:03:06 - 00:52:04:11
as opposed to, for example,
00:52:04:11 - 00:52:06:02
an or risk cover.
00:52:06:02 - 00:52:08:00
the definition of those perils
00:52:08:00 - 00:52:09:04
is obviously critical
00:52:09:04 - 00:52:10:24
to identify as cover.
00:52:10:24 - 00:52:11:20
And you have to apply
00:52:11:20 - 00:52:14:20
those definitions to
00:52:15:15 - 00:52:16:24
an entirely fluid
00:52:16:24 - 00:52:17:06
and ever
00:52:17:06 - 00:52:18:23
changing environment,
00:52:18:23 - 00:52:21:13
as though each new thing throws up,
00:52:21:13 - 00:52:24:00
new issues to which we have to apply
00:52:24:00 - 00:52:27:02
static defined perils in a policy.
00:52:27:02 - 00:52:28:23
So, I see what you're saying.
00:52:28:23 - 00:52:29:13
It'd be interesting
00:52:29:13 - 00:52:34:10
to see how you define, when one could,
00:52:35:07 - 00:52:38:14
recover for a voluntary divestiture,
00:52:38:19 - 00:52:39:11
because, of course,
00:52:39:11 - 00:52:41:24
there's a whole range of moral
00:52:41:24 - 00:52:43:12
hazard, moral hazard, and,
00:52:44:18 - 00:52:45:09
and, and
00:52:45:09 - 00:52:47:15
reasons for no longer being,
00:52:47:15 - 00:52:48:18
in a country.
00:52:48:18 - 00:52:50:20
But against that, David, I think it's,
00:52:50:20 - 00:52:51:02
you know,
00:52:51:02 - 00:52:52:04
you could clearly say
00:52:52:04 - 00:52:54:14
that in the case of Russia,
00:52:54:14 - 00:52:56:12
you know, the can't really be any doubt
00:52:56:12 - 00:52:59:12
a layman's view would, would be pretty
00:52:59:13 - 00:53:00:22
much what I think a market
00:53:00:22 - 00:53:02:03
practitioner's view would be that,
00:53:02:03 - 00:53:02:17
you know, it's
00:53:02:17 - 00:53:03:12
it's intolerable
00:53:03:12 - 00:53:05:05
to carry on operating in that country
00:53:05:05 - 00:53:07:04
for all sorts of reasons.
00:53:07:04 - 00:53:07:19
and therefore,
00:53:07:19 - 00:53:10:10
it would be perfectly legitimate to,
00:53:10:10 - 00:53:11:21
to pay a claim for abandonment
00:53:11:21 - 00:53:12:12
if there's operation.
00:53:12:12 - 00:53:14:08
I think there is a way of doing this
00:53:14:08 - 00:53:16:01
without sort of,
00:53:16:01 - 00:53:17:03
exposing underwriters
00:53:17:03 - 00:53:19:09
too much to a moral hazard type situation
00:53:19:09 - 00:53:21:03
where the financial
00:53:21:03 - 00:53:23:00
motivation for the investment
00:53:23:00 - 00:53:24:22
has been lost due to whatever
00:53:24:22 - 00:53:25:15
I think there's a way
00:53:25:15 - 00:53:26:24
there's a way through this, I believe.
00:53:26:24 - 00:53:28:06
I think just because it's challenging
00:53:28:06 - 00:53:28:16
doesn't mean
00:53:28:16 - 00:53:30:02
the market can't step up to meet it,
00:53:30:02 - 00:53:31:16
because the market has always dealt
00:53:31:16 - 00:53:32:20
with the difficult borders
00:53:32:20 - 00:53:34:10
between is this economics?
00:53:34:10 - 00:53:35:16
Is it politics? Is it,
00:53:37:11 - 00:53:37:19
is it
00:53:37:19 - 00:53:39:08
individual,
00:53:39:08 - 00:53:40:08
failure of a business
00:53:40:08 - 00:53:41:12
or is it from the outside?
00:53:41:12 - 00:53:42:14
So those are challenges
00:53:42:14 - 00:53:43:11
we've always dealt with.
00:53:43:11 - 00:53:44:06
And I don't see the reason
00:53:44:06 - 00:53:45:21
to step back from development
00:53:45:21 - 00:53:46:16
because of that.
00:53:46:16 - 00:53:48:15
Could I just ask, following on from
00:53:48:15 - 00:53:51:15
that about the, talking of,
00:53:53:23 - 00:53:54:16
things that aren't
00:53:54:16 - 00:53:55:16
necessarily covered
00:53:55:16 - 00:53:57:21
by political risk and political violence,
00:53:57:21 - 00:53:59:24
the blockade on the Polish,
00:53:59:24 - 00:54:02:10
Ukrainian border.
00:54:02:10 - 00:54:05:03
Just wondered,
00:54:05:03 - 00:54:06:08
what,
00:54:06:08 - 00:54:07:08
are you are you
00:54:07:08 - 00:54:09:00
can you give us an update on that
00:54:09:00 - 00:54:10:06
and can you is
00:54:10:06 - 00:54:12:08
is there an insurance involvement in that
00:54:12:08 - 00:54:13:18
from Ukrainian perspective?
00:54:13:18 - 00:54:15:14
Igor and Olena.
00:54:15:14 - 00:54:17:23
Well, that's a tricky question.
00:54:17:23 - 00:54:18:21
I don't think we have
00:54:18:21 - 00:54:21:21
already made submission for that yet.
00:54:23:00 - 00:54:25:19
and it's even difficult to qualify it.
00:54:25:19 - 00:54:27:14
Is it a strike?
00:54:27:14 - 00:54:29:03
Is it the civil unrest?
00:54:29:03 - 00:54:31:22
Is it some demonstration? I don't know,
00:54:33:10 - 00:54:34:21
the blockades on,
00:54:34:21 - 00:54:36:00
Polish-Ukrainian border
00:54:36:00 - 00:54:39:03
started on November 6th, 2023.
00:54:39:12 - 00:54:41:12
So last year,
00:54:41:12 - 00:54:43:01
Polish farmers were claiming
00:54:43:01 - 00:54:45:23
some unfair competition. So,
00:54:45:23 - 00:54:47:12
we will not dive into that.
00:54:47:12 - 00:54:48:17
defer, I think,
00:54:48:17 - 00:54:50:15
because there are many speculations
00:54:50:15 - 00:54:52:19
and allegations.
00:54:52:19 - 00:54:55:22
since then, hundreds of thousands
00:54:56:09 - 00:54:57:09
of businesses
00:54:57:09 - 00:55:00:09
have lost time and money and demand.
00:55:00:20 - 00:55:03:20
There were deaths on the border,
00:55:04:20 - 00:55:07:05
resulting in, in major losses.
00:55:07:05 - 00:55:08:21
So, this is something
00:55:08:21 - 00:55:11:12
which definitely needs a solution.
00:55:11:12 - 00:55:14:16
And I think, I think we do not see
00:55:14:16 - 00:55:16:07
any other way around it
00:55:16:07 - 00:55:17:23
rather than having it covered
00:55:17:23 - 00:55:21:11
under the political risk, insurance.
00:55:22:16 - 00:55:24:19
Because it simply because it causes
00:55:24:19 - 00:55:27:19
so much losses and it's,
00:55:28:00 - 00:55:29:07
it's a situation which,
00:55:29:07 - 00:55:31:02
which could not be predicted.
00:55:31:02 - 00:55:32:12
And it's in fact,
00:55:32:12 - 00:55:35:24
it can, occur on other borders
00:55:35:24 - 00:55:37:01
across the world. Right?
00:55:37:01 - 00:55:39:05
So this is not something,
00:55:39:05 - 00:55:40:10
related particularly
00:55:40:10 - 00:55:42:03
to Ukraine and Poland.
00:55:42:03 - 00:55:43:16
This could happen anywhere.
00:55:44:23 - 00:55:47:13
currently the estimated
00:55:47:13 - 00:55:50:09
losses or damages are around
00:55:50:09 - 00:55:55:06
200 million US dollars,
00:55:55:06 - 00:55:56:06
and still growing.
00:55:56:06 - 00:55:56:20
So this
00:55:56:20 - 00:55:58:01
this is still the situation
00:55:58:01 - 00:55:59:12
we're living in.
00:55:59:12 - 00:56:01:12
And I honestly don't know
00:56:01:12 - 00:56:02:18
how it's going to be resolved.
00:56:02:18 - 00:56:03:11
I hope that's
00:56:03:11 - 00:56:05:06
when this recording is released.
00:56:05:06 - 00:56:07:05
The blockade will be over.
00:56:07:05 - 00:56:08:18
But, yeah,
00:56:08:18 - 00:56:10:13
this definitely needs a solution.
00:56:10:13 - 00:56:11:06
What do you think?
00:56:11:06 - 00:56:13:01
Have you seen anything like this before?
00:56:13:01 - 00:56:13:23
Because to me,
00:56:13:23 - 00:56:16:23
it sounds exactly like the political risk.
00:56:17:24 - 00:56:19:06
Well, it's it's an interesting point,
00:56:19:06 - 00:56:20:09
and perhaps Nick could answer it.
00:56:20:09 - 00:56:22:10
I can only say that I've,
00:56:22:10 - 00:56:24:08
I've done a number of,
00:56:24:08 - 00:56:27:01
cases, had a number of instructions where
00:56:27:01 - 00:56:28:00
there's been a blockade
00:56:28:00 - 00:56:29:05
involved, and,
00:56:29:05 - 00:56:32:05
blockade is often not covered.
00:56:32:05 - 00:56:33:11
I'm not sure why blockade is often
00:56:33:11 - 00:56:33:23
not covered,
00:56:33:23 - 00:56:35:17
but that has often been a difficulty
00:56:35:17 - 00:56:36:11
with the
00:56:36:11 - 00:56:38:03
with the adjustment of the claim is what
00:56:38:03 - 00:56:39:11
what damages caused,
00:56:40:16 - 00:56:42:01
or what is the blockade covered?
00:56:42:01 - 00:56:43:19
And even if you might argue
00:56:43:19 - 00:56:44:15
that it is covered
00:56:44:15 - 00:56:45:10
and you might say
00:56:45:10 - 00:56:46:24
a blockade is something else,
00:56:46:24 - 00:56:47:11
you might say
00:56:47:11 - 00:56:49:01
a blockade is a civil commotion.
00:56:49:01 - 00:56:50:24
If it's not government sanctioned.
00:56:50:24 - 00:56:52:12
But then you have to establish
00:56:52:12 - 00:56:53:18
what damage
00:56:53:18 - 00:56:55:02
the blockade is causing
00:56:55:02 - 00:56:56:19
sometimes as well, if any.
00:56:56:19 - 00:56:57:20
So I don't Nick,
00:56:57:20 - 00:56:59:06
what do you think about blockade and.
00:56:59:06 - 00:56:59:15
Yeah,
00:56:59:15 - 00:56:59:24
I mean,
00:56:59:24 - 00:57:01:15
I have seen it covered occasionally
00:57:01:15 - 00:57:02:21
in a policy,
00:57:02:21 - 00:57:05:15
in political risk policy, but it's not standard.
00:57:05:15 - 00:57:06:12
It's really essentially,
00:57:06:12 - 00:57:08:15
I think, a business interruption loss.
00:57:08:15 - 00:57:09:17
It's not a million miles
00:57:09:17 - 00:57:11:03
removed from export license
00:57:11:03 - 00:57:12:19
cancellation, import restrictions,
00:57:12:19 - 00:57:14:09
which are covered regularly on a contract
00:57:14:09 - 00:57:15:06
frustration policy.
00:57:15:06 - 00:57:18:04
So I don't think it's too difficult
00:57:18:04 - 00:57:18:18
to add it
00:57:18:18 - 00:57:21:07
into the cover of a political risk policy.
00:57:21:07 - 00:57:22:07
But again,
00:57:22:07 - 00:57:24:08
we will run up against underwriters
00:57:24:08 - 00:57:25:08
inherent hostility
00:57:25:08 - 00:57:26:19
to anything that involves
00:57:26:19 - 00:57:28:07
non damage business interruption,
00:57:28:07 - 00:57:29:07
which is what a blockade
00:57:29:07 - 00:57:30:05
essentially will be.
00:57:31:07 - 00:57:31:14
Yeah.
00:57:31:14 - 00:57:33:01
It seems like something that
00:57:33:01 - 00:57:34:11
definitely we need to address
00:57:34:11 - 00:57:37:13
than just looking to the future really.
00:57:39:10 - 00:57:40:22
which
00:57:40:22 - 00:57:43:01
well when the big war is finally over
00:57:43:01 - 00:57:44:19
hopefully successfully
00:57:44:19 - 00:57:47:19
which areas do you think,
00:57:48:16 - 00:57:50:05
of the Ukrainian economy
00:57:50:05 - 00:57:53:02
do you think we'll, we'll be looking for,
00:57:53:02 - 00:57:54:07
political trade credit
00:57:54:07 - 00:57:56:21
and insurance and investment the most.
00:57:56:21 - 00:57:57:02
Yeah.
00:57:57:02 - 00:57:59:04
So basically,
00:57:59:04 - 00:58:00:23
after the once the war is over,
00:58:00:23 - 00:58:01:21
would you expect that
00:58:01:21 - 00:58:02:24
there will be
00:58:02:24 - 00:58:05:05
a lot of recovery and reconstruction
00:58:05:05 - 00:58:06:08
projects in Ukraine.
00:58:06:08 - 00:58:09:06
So we do you expect that the,
00:58:09:06 - 00:58:11:19
you know, the political risk,
00:58:11:19 - 00:58:12:24
coverage and insurance
00:58:12:24 - 00:58:13:15
and the war
00:58:13:15 - 00:58:16:17
risk specifically will be highly required
00:58:16:17 - 00:58:17:16
for those companies
00:58:17:16 - 00:58:19:05
who are going to participate
00:58:19:05 - 00:58:20:11
in the reconstruction.
00:58:20:11 - 00:58:21:16
So the construction
00:58:21:16 - 00:58:24:24
of the bridges, roads, social,
00:58:25:04 - 00:58:26:09
different social objects
00:58:26:09 - 00:58:27:09
and infrastructure
00:58:27:09 - 00:58:29:11
like schools and hospitals.
00:58:29:11 - 00:58:30:15
So I think that everything
00:58:30:15 - 00:58:32:01
which is related to the infrastructure
00:58:32:01 - 00:58:34:04
and energy will be in high demand.
00:58:34:04 - 00:58:35:07
But still,
00:58:35:07 - 00:58:36:11
agriculture remains
00:58:36:11 - 00:58:38:18
to be one of the most important,
00:58:38:18 - 00:58:39:23
industry in Ukraine
00:58:39:23 - 00:58:41:18
because of the expert.
00:58:41:18 - 00:58:43:01
And I think that the,
00:58:45:02 - 00:58:45:21
you know, the,
00:58:45:21 - 00:58:47:22
the activities related to
00:58:47:22 - 00:58:50:03
agriculture will also need,
00:58:50:03 - 00:58:50:18
you know,
00:58:50:18 - 00:58:51:09
the talk
00:58:51:09 - 00:58:54:09
that type of, coverage and insurance
00:58:54:14 - 00:58:56:24
and I, I basically suspect that almost
00:58:56:24 - 00:58:59:00
every investment in the future in Ukraine
00:58:59:00 - 00:59:00:06
Ukraine,
00:59:00:06 - 00:59:01:05
will require
00:59:01:05 - 00:59:02:09
some kind of coverage
00:59:02:09 - 00:59:03:23
against the political violence risk
00:59:03:23 - 00:59:05:12
because of the, you know,
00:59:05:12 - 00:59:07:01
this past experience
00:59:07:01 - 00:59:09:09
and because we still continue to,
00:59:09:09 - 00:59:11:17
to have Russia, on the border.
00:59:11:17 - 00:59:11:23
Yeah.
00:59:11:23 - 00:59:13:14
Despite that, the war is over
00:59:13:14 - 00:59:15:22
there is still may be a risk
00:59:15:22 - 00:59:18:05
that some kind of conflict may,
00:59:18:05 - 00:59:20:02
break out in the future.
00:59:20:02 - 00:59:21:11
So I do think I do
00:59:21:11 - 00:59:23:05
think that, you know, this,
00:59:23:05 - 00:59:23:21
political risk
00:59:23:21 - 00:59:24:19
coverage will be
00:59:24:19 - 00:59:27:00
very much required in the future.
00:59:27:00 - 00:59:30:00
And I do think that, you know,
00:59:30:13 - 00:59:31:21
this product will be provided
00:59:31:21 - 00:59:34:11
not only by the foreign reinsurance
00:59:34:11 - 00:59:35:18
companies and insurance,
00:59:35:18 - 00:59:37:08
but also by the local one,
00:59:37:08 - 00:59:39:11
because the local companies,
00:59:39:11 - 00:59:41:15
so far have been not very active
00:59:41:15 - 00:59:42:21
in that kind of product.
00:59:42:21 - 00:59:44:23
They can underwrites some
00:59:44:23 - 00:59:46:16
more risks, but very limited,
00:59:47:18 - 00:59:49:06
extent.
00:59:50:03 - 00:59:50:16
Thank you.
00:59:50:16 - 00:59:50:24
Nick, what
00:59:50:24 - 00:59:52:23
do you think about the availability
00:59:52:23 - 00:59:55:06
after the after the the big war is over?
00:59:55:06 - 00:59:56:10
I think capacity
00:59:56:10 - 00:59:58:23
will flood back into the market.
00:59:58:23 - 00:59:59:15
Why wouldn't it
00:59:59:15 - 01:00:00:10
providing
01:00:00:10 - 01:00:01:13
there's a reasonable prospect
01:00:01:13 - 01:00:03:09
of a lasting peace?
01:00:03:09 - 01:00:04:20
I think capacity will flood back in.
01:00:04:20 - 01:00:07:13
I think also there will be creativity
01:00:07:13 - 01:00:08:06
in innovation
01:00:08:06 - 01:00:09:21
amongst underwriters in refining
01:00:09:21 - 01:00:11:02
and developing the product form.
01:00:11:02 - 01:00:12:18
I'm not a lone voice on this other
01:00:12:18 - 01:00:13:18
people are saying
01:00:13:18 - 01:00:15:04
similar things to me,
01:00:15:04 - 01:00:15:19
so I'm
01:00:15:19 - 01:00:16:22
fairly optimistic
01:00:16:22 - 01:00:18:02
that the market will respond
01:00:18:02 - 01:00:21:02
well in the reconstruction of Ukraine.
01:00:21:03 - 01:00:22:19
I like the word innovation.
01:00:22:19 - 01:00:24:06
Actually, I like it.
01:00:24:06 - 01:00:26:04
I like the sound of it.
01:00:26:04 - 01:00:28:19
You know, our government
01:00:28:19 - 01:00:32:01
has proclaimed the Build Back Better strategy.
01:00:32:01 - 01:00:34:03
So they want to reconstruct
01:00:34:03 - 01:00:35:24
the country better than it was before.
01:00:35:24 - 01:00:37:08
So there is no point
01:00:37:08 - 01:00:39:13
in rebuilding something in this.
01:00:39:13 - 01:00:40:16
Exactly the same state
01:00:40:16 - 01:00:43:01
it was before the the full scale war.
01:00:43:01 - 01:00:45:08
So, insurance,
01:00:45:08 - 01:00:47:15
could probably be a part of that
01:00:47:15 - 01:00:48:23
BBB strategy.
01:00:49:24 - 01:00:52:16
Well, on the note of,
01:00:52:16 - 01:00:55:01
building better things,
01:00:55:01 - 01:00:58:01
the end of hostilities, and the future.
01:00:58:13 - 01:01:01:10
I'd like to thank you both, Igor
01:01:01:10 - 01:01:03:05
and Olena for,
01:01:03:05 - 01:01:07:08
joining us on the podcast, from Kyiv.
01:01:07:08 - 01:01:08:12
I'm very pleased
01:01:08:12 - 01:01:11:12
they that we weren't interrupted.
01:01:11:16 - 01:01:14:15
and obviously, we all hope for,
01:01:14:15 - 01:01:17:15
a bright future for Ukraine, but,
01:01:17:15 - 01:01:19:16
thank you again.
01:01:19:16 - 01:01:20:10
thanks for your
01:01:20:10 - 01:01:22:10
for your continued bravery.
01:01:22:10 - 01:01:22:23
And hopefully
01:01:22:23 - 01:01:24:02
we can continue our discussion
01:01:24:02 - 01:01:25:12
for another time.
01:01:25:12 - 01:01:26:18
Nick, thanks very much for coming on
01:01:26:18 - 01:01:28:20
and giving us your expertise.
01:01:28:20 - 01:01:31:15
and your really interesting insights,
01:01:31:15 - 01:01:32:16
into this situation.
01:01:32:16 - 01:01:35:16
And thank you, everyone, for listening.
01:01:35:24 - 01:01:38:19
Thank you for having us.
01:01:38:19 - 01:01:39:24
Thank you.
01:01:39:24 - 01:01:42:10
Thank you.
01:01:42:10 - 01:01:44:03
Thank you for listening to Risk Matters,
01:01:44:03 - 01:01:46:11
the DWF insurance podcast.
01:01:46:11 - 01:01:47:19
We hope you join us again soon
01:01:47:19 - 01:01:49:12
for future podcasts in our series.
