Mazzuoli also warned that if the conflict “widens geographically” the result could be “really negative” for the (re)insurance industry.

Speaking to The Insurer TV on the direct and indirect implications of the conflict for the industry, Mazzuoli said the financial market turmoil it has created is likely to have more of an impact on (re)insurers and ratings than sanctions, which to date – while still substantial – have been manageable from a loss perspective.

For Mazzuoli, it’s the economic turmoil, inflation and consequent claims inflation the industry should be wary of.

Specifically on inflation, Mazzuoli said: “If inflation, or high inflation, turned into a problem for insurance reserves, for claims to be paid in a broader context, then this might turn into a larger problem for the industry.”

As it currently stands, Fitch expects the conflict to remain an earnings event for the industry, meaning the impact to the ratings from the conflict will be neutral, but headwinds should be monitored carefully.

Returning to the prospect of countries becoming embroiled in the conflict, he said: “If the current conflict widens geographically so that we have other countries involved either in the conflict per se or in the sanctions regime, then the headwinds [associated with that] could turn really negative.”

Bracing for claims

Speaking of specialty lines that could suffer losses as a result of the conflict, Mazzuoli said the aviation sector should expect more claims to emerge and, with them, more uncertainty as carriers look to contest them.

He also pointed to headwinds facing specialty insurers from lines of business such as marine, energy, trade credit and cyber.

As reported by The Insurer, AerCap Holdings submitted a $3.5bn claim on its ~$5bn all risks policy. For aviation insurers, this could be the start of a streak of other claims as Russia’s seizure of aviation assets impacts other smaller aviation-related companies.

“There will be a series of other claims that will be announced. Certainly, these claims will be contested by the insurance industry and therefore the uncertainty on how large the claims will be in the end is hard to determine at this point in time,” Mazzuoli warned.

AerCap is the largest aircraft leasing company and its claim is already expected to be disputed by insurers.

Increased scrutiny over cyber policy wordings

Commenting on how sanctions could affect the (re)insurance sector, Mazzuoli noted major headwinds could arise from economic growth assumptions and rising inflation, which could have an impact on claims inflation and hurt the industry’s reserves.

In addition, cyber insurers could face scrutiny over the wordings across their policies as clauses could be contested.

“The question now arises – how can we prove … whether a war has been the cause of cyber attacks and therefore cyber claims? This is why the wording will be tested,” Mazzuoli added.

The country of origin of cyber attacks, who the threat actors are, or simply if the attacks are indeed linked to the war, are questions likely to test the strength of cyber insurers’ policy wordings.

“Even if we knew that a cyber attack came from Russia … it probably would be hard to determine whether the war was the cause in the end or whether it would have happened anyway. So this is why the policy language will be tested if these types of claims arise,” Mazzuoli noted.

Mazzuoli’s remarks were made after Fitch in early March said the conflict between Ukraine and Russia had increased the risk of cyber attacks that could cause losses for property casualty insurers globally offering cyber coverage.