Insurers not likely exposed to BI claims on Russian gas shut-down: Fitch

Insurers are not materially exposed to risk of business interruption (BI) claims that could stem from a cut-off or rationing of Russian natural gas supplies to Europe, the  Fitch Ratings agency said, adding its voice to a growing consensus on the question.

Business interruption coverage chiefly comes as an add-on to property policies triggered by physical damage to business assets. “They do not cover losses caused by a supplier’s failure to deliver raw materials or the energy needed for a business to operate.”

Eventual commercial insurance claims after a stoppage in natural gas deliveries would more likely gain traction under political risk policies, Fitch notes.

Even such claims are unlikely to prove “straightforward,” Fitch claims. Few policies will have been constructed to cover such a specific risk, Fitch said, and more generic policies will likely face “restrictive” policy wordings. Claimants could struggle to successfully contest claims rejected on the grounds of wording, Fitch claims, albeit with caveat from the pandemic-era BI claims that “precise wording can be crucial.”

Losses from eventual rationing are outright “not covered,” Fitch said in a sweeping claim with suggestion that governments provide their own accommodation for industry.

Indirect claims, however, could flourish in select cases. Fitch offers up the threat of burst water pipes if households aren’t heated continuously. Likewise, production shutdowns could lead to equipment failure.

“However, we would not expect claims indirectly linked to a gas cut-off to have a material impact on insurers’ profits,” Fitch analysts wrote.