Lloyd’s of London has set aside $1.26bn to cover claims related to the war in Ukraine, which it said is a similar size to a “small to medium-sized natural catastrophe.”
A report by Reuters towards the end of last week revealed that announcement was made as the commercial insurance market recorded a first-half pre-tax loss of $2.1bn.
The reserves set aside for claims related to the war in Ukraine were claims net of reinsurance, Lloyd’s said in a statement.
John Neal, Lloyd’s chief executive told Reuters, “We’ve taken a very early view of what we think the financial implications will be,” adding the losses were likely to be about the same size as “a small to medium-sized natural catastrophe”.
Around a quarter of the predicted losses are likely to come from the aviation market, Neal added. This is because of the number of planes trapped in Russia. Insurers globally may face claims of around $10 billion to $15 billion from the conflict, Neal added.
Earlier in the year, it was reported that global insurance companies decided not to insure any Ukrainian landings or aircraft in the country’s airspace.
At the time, the Ukrainian government pledged funds of up to $592m to try to keep its airspace open to commercial flights.
On social media, Prime Minister Denys Shmygal said that the funds “were allocated to ensure flight safety in Ukraine for insurance and leasing companies.”
Adding that, “This decision will stabilise the situation on the market of passenger air transportation and will guarantee the return to Ukraine of our citizens who are currently abroad.”
Since then, many insurers reportedly decided to withdraw cover. Publications in Ukraine reported that the Lloyd’s marketplace suspended cover for flights passing through the region’s airspace.
Airlines without insurance protection cannot fly above Ukraine and given that Ukrainian Airlines leases the majority of its aircraft, this has a huge impact on the company and individuals looking to leave and enter the country.
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