Munich Re says RU-UA exposure ‘small’ but warns on possible ‘severe’ macro spillovers

Munich Re expects little to no direct impact from the Russian invasion of Ukraine, but warns that the economic spillover for some economies could yet prove “severe,” management said in the FY2021 annual report.

" Munich Re’s insurance business in Ukraine and Russia is small," management noted and war risk is excluded in all relevant lines of business. "We therefore do not expect any significant direct impact on our business."

Elsewhere in its global insurance books, the main exposures will be from covering political risks as well as from trade credit reinsurance and structured credit reinsurance, Munich Re said without hinting at the scale impact.

Portfolio investments in the two nations is likewise "small," but sanctions regimes mean that defaults "cannot be ruled out" and the "risk of write-downs is therefore elevated."

Beyond those direct impacts, the spill-over effects of the war and sanctions "may have severe repercussions for entire economies."

Global capital markets could see a "dramatic" increase in uncertainty and volatility, management wrote.

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