Speaking to The Insurer TV as part of its #ReinsuranceMonth interview series, Léger said the war between Russia and Ukraine has had a “very significant impact on the industry”, with several other large (re)insurers and brokers also withdrawing from the region or transferring ownership of their Russian operations to local staff.

“The fact that the country has been sanctioned, and with all the complexities that come with just that, it required a big change in our underwriting,” he said.

“We have been very public about the fact that we retracted entirely from the Russian market, which is obviously the most radical move you can do in underwriting if you pull back from a market entirely,” Léger said.

The war in Ukraine has further compounded the pressures the industry was facing following Covid-19, particularly around supply and demand dynamics.

“The pressure we see on the supply chains, and the impact it does actually have today on inflation, but also delays in delivery, are all elements that obviously have a big impact on insurance,” he said.

“We have to look specifically at many different classes of business, particularly business interruption … contingent business interruption, and what the impact is,” he added.

Supply chain disruptions after the Covid-19 pandemic have put upward pressure on material and labour costs, which have in turn caused reinsurers’ earnings to deteriorate further, especially across commercial property and motor (re)insurance lines, according to a recent Moody’s report.

Speaking about how Swiss Re has prepared for the potential impact of the war more generally, Léger said the reinsurer studied different scenarios with varying duration of hostilities and geographical spread, and chose one that equates to a “mid-sized cat event-type loss”.

Russia-Ukraine-related underwriting losses continued to make a relatively small dent in earnings during the second quarter of 2022, amid a recognition that the more complex components of the loss – notably aviation exposures – will potentially take years to crystallise.

European reinsurers' H1 Russia-Ukraine reserves

However, Léger is also concerned about other risks arising from the conflict.

“The war has also led to a food crisis and I am concerned that the combination of a food crisis and inflation will potentially lead to civil unrest,” he warned. “So anything related to coverage in that space is something we are watching very, very closely. Without becoming too technical, there are a dozen areas that are being impacted,” Léger said.

Léger also mentioned marine and aviation as sectors that have been significantly impacted due to the sanctions imposed on Russia, given how they “react in a very sensitive way” to geopolitical tensions.

“These are, for example, two lines that are really in the eye of the storm currently,” he concluded.

More from The Insurer TV’s interview with Swiss Re’s group CUO Thierry Léger will feature in our Monte Carlo Dailes, which will be available from Sunday 11 September. In particular, look out for Léger’s comments on the state of the reinsurance market, pricing expectations and why nat cat is still the “king’s class” in reinsurance.