Sanctions will hit Russian insurers’ access to international reinsurers

Russian insurers are unlikely to suffer any immediate FX funding pinch on account of the slew of western sanctions against the country, analysts at  S&P have noted.

"With financial leverage for the sector below 4%, Russian insurers have very limited debt and do not depend on any financing raised abroad," S&P analysts wrote in a recent ratings announcement.

The industry can even boast of a net long position in foreign currency on its investment portfolio, which, as the ruble tanks, can help counterbalance domestic market losses.

But the industry will eventually find itself short on reinsurance supply as the dominant foreign names remain off the market.

Russian primary carriers "depend on reinsurance protection purchased abroad," S&P said, citing reinsurance supply mainly from the UK, Germany, Switzerland, France, and the US.

The industry's reinsurance utilization ratio fluctuates around 15% for P&C insurers, S&P claimed.

Major reinsurers reporting Q4 earnings during the course of the Ukrainian invasion have largely claimed "immaterial" exposure to the Russian market.

Swiss Re, Munich Re and AXA have been amongst leading western reinsurers to claim very limited exposure either via investment portfolios or insurance exposures.

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