Japan’s nonlife insurers stop underwriting contracts in Russia

Yomiuri Shimbun file photos
Head office buildings of Tokio Marine & Nichido Fire Insurance Co., left, and Sompo Japan Insurance Inc.

Japanese nonlife insurance companies have stopped underwriting insurance contracts in Russia, including the renewal of contracts, making it difficult for Japanese companies to continue operating there, it was learned recently.

The Russian government has banned transactions between Russian insurers and those of “unfriendly countries,” including Japan, the United States and European countries, to counter the economic sanctions imposed by these nations.

More Japanese companies are likely to withdraw from Russia, as it has become difficult from the perspective of risk management to continue their operations there.

Tokio Marine & Nichido Fire Insurance Co., Sompo Japan Insurance Inc., and Mitsui Sumitomo Insurance Co. have effectively provided many Japanese companies operating in Russia with fire insurance, liability insurance and the like. Insurance for companies typically covers a one-year period, making it indispensable for the contracts to be renewed.

With the latest suspension of underwriting insurance contracts in Russia, Japanese companies operating there are even more likely to become uninsured or see their premiums go up.

The three Japanese nonlife insurers had concluded reinsurance contracts with Russian insurers, with which Japanese enterprises operating in Russia had signed contracts, or with European insurers operating in Russia. Using the Russian or European insurers as an intermediary, the three Japanese insurers had underwritten insurance covering Japanese companies in Russia.

According to Tokyo Shoko Research, Ltd., 200 Japanese companies have been operating in Russia.

The Japanese insurers are currently introducing their corporate clients to Russian insurers. However, the creditworthiness of Russia’s economy has declined considerably, so many companies are likely to balk at signing insurance contracts with Russian firms.

Even if Japanese companies enter into a contract with a Russian insurer, the Japanese insurers cannot be involved, which may push premiums higher or reduce potential compensation.

Allianz SE of Germany also announced that it has stopped underwriting new insurance business in Russia.