Firms underprepared for Ukraine impact - Mactavish

One in five firms are unaware of the effects of Ukraine-related sanctions and war exclusions, stemming from the Ukraine crisis, have on their business, according to a report from Mactavish.

If also warns of the impact of the ongoing war and its fallout on claims inflation, given the rise in commodity prices, energy crisis and ongoing supply chain issues.

The introduction of new exclusions on cover in response to the Ukraine crisis narrows protection and consequently increase the risk of claims falling outside of cover, finds the report.

Claims that are currently live and unrelated to the war can also be affected by supply chain disruptions which make it harder and longer for businesses to recover, increasing the risk of significant costs falling outside the indemnity period once the cover expires.

The acceleration of inflation and rising costs of materials for reinstatement and manufacturing parts among others, also makes under insurance a real threat for insureds.

”Values must be updated but the pandemic caused widespread delays and backlogs to the availability of revaluations,” it warns. “Insureds could end up, in the event of a claim, with a considerable gap between declared and reinstatement values.” 

Risk management a priority 

One in five businesses do not feel confident that their insurance will cover their business given the risks and operational shifts arising from the crisis, according to Mactavish.

As a result of the ongoing challenges, business resilience is becoming a higher priority item on the board’s agenda. 

Seventy percent of businesses have reinforced their business continuity plans in response to the crisis, found the report.

”The nature and prevalence of major crises have forced organisations to focus more strategically and concentrate resource on issues of crisis management and preparedness,” notes the report.

“In this high-risk operating environment, there’s simply no excuse for any Board to either skimp on risk management or to view insurance as a commodity purchase.”

The report warns about a potential loss of confidence in the market for insurance buyers.

“Trust and reputation are paramount, and this period of uncertainty must be used to rebuild and refocus. If not, the irreparable reputational damage will continue to be felt for many decades to come,” Mactavish adds.