Russia-Ukraine Conflict: One Year On

  • Market Insight 24 February 2023 24 February 2023
  • UK & Europe

  • Crisis-Ukraine-Russia

24 February 2023 marks the one-year anniversary of Russia’s invasion of Ukraine. This article reflects on the fall-out for the insurance industry from sanctions measures introduced by the UK and EU over the past year in response to Russia’s actions.

UK and EU sanctions restrictions imposed on Russia since February 2022 are wide-reaching, targeting Russia’s financial, energy, transport, manufacturing and defence sectors.

Notably, since February 2022 over a thousand individuals and over one hundred entities have been added to the UK and EU consolidated lists of asset freeze targets for their reported roles in supporting Russia’s activities in Ukraine.  

Both the UK and the EU have introduced prohibitions on the provision of numerous goods and technologies to Russia, on the movement and export of many goods and technologies from Russia and on the provision of associated services, such as (re)insurance.

The impact of these restrictions on the insurance industry has been significant, posing major compliance challenges.

Increased compliance burden

As outlined above, the constant flux of the Russia sanctions landscape over the past year has made the task of identifying and mitigating the sanctions risks associated with existing and proposed policies very challenging.

For example, where a pre-existing policy now has a connection to an asset freeze target, issues are likely to arise around the receipt of premium, cancellation, payment of return premium and payment of claims.

In addition, the decision whether to renew or write new cover will be impacted heavily by restrictions on dealings with certain persons and goods.

The new restrictions are accompanied by reporting requirements in respect of frozen funds and potential breaches. In some jurisdictions, including the UK, informational reports are also required for UK asset freeze targets.

A further area where the compliance burden has increased is in connection with the Russian Oil Products Price Cap. The price cap measures imposed by G7 countries, including the UK, the EU and Australia, require insurers to obtain attestation that the price cap has been met by the parties to the underlying transaction. 

Such an influx of new legislation and requirements create a significant workload for compliance functions and the significant penalties for non-adherence reinforce the importance of having robust and proper due diligence measures in place and having the right sanctions compliance expertise.

Divergence between sanctions regimes

We have seen a high degree of alignment across the UK, EU and US in terms of Russian sanctions measures implemented since February 2022.

However, there are areas of divergence, both in terms of designations and some trade restrictions. These differences can create huge challenges for London market insurers with a presence in more than one of these jurisdictions.

Increased Litigation and Enforcement

There are a great many insurance disputes arising from the Russia-related sanctions imposed since February 2022.  We anticipate the numbers rising further, with sanctions clauses likely being increasingly tested both in the UK and other jurisdictions.

Certain classes of business (such as those with an aviation touchpoint) have already seen large claims made by insureds, some of which are currently the subject of disputes in the UK courts. We anticipate that this trend will extend to a number of further classes of Russia-related business.

As the year progresses, we will likely see further restrictions imposed by the UK and the EU in response to the ongoing conflict in Ukraine.

Indeed, the EU imminently intends to designate more entities and individuals involved in spreading misinformation and to extend export restrictions on further categories of goods.

In addition, looking ahead, we anticipate that there will be an increasing focus from UK and EU authorities towards enforcement to further deter non-compliance.  

The last 12 months have seen an unprecedented wave of sanctions imposed against Russia.  This has created disruption for insurers with respect of their Russia related business.  Moving from a period of intense introduction and implementation of sanctions to a more business as usual trading environment comes with its own challenges however, which will no doubt keep sanctions compliance at the forefront of insurers’ minds.     


Additional authors:

Isabel Phillips, Aisha Hirani

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