Axa braces for Ukraine-Russia claims

Axa is facing “potential claims” exposure across three lines of business as a result of the ongoing war between Russia and Ukraine.

In its 2022 half-year financial update, the insurer revealed that the impact of the conflict has already set Axa back around €300m.

Alban de Mailly Nesle, group chief financial officer at Axa, explained that although the insurer has “received extremely few claims” linked to the war so far, the business is still monitoring and reviewing its “reserves in anticipation of potential claims”.

Exposure to risks

One key business line at Axa that could be subject to conflict-related claims is aviation due “to the planes that have been grounded by the Russian government at the beginning of the war with Ukraine”, de Mailly Nesle noted.

“That’s the majority of the €300m that we have booked this first half,” he added.

This situation arose after the Russian Federation’s president – Vladimir Putin – signed a law on 14 March 2022 that allowed Russian airlines to retain and operate over 500 leased airliner jets that had become stranded in Russia following the commencement of hostilities in February this year.

Putin’s action was in response to sanctions on Russian economic assets being imposed by the Western world in reaction to Russia’s invasion of Ukraine.

“There are obviously uncertainties as to the planes and whether they will be given back to their owners, [as well as uncertainties around] the length and scope of the war in Ukraine,” the chief financial officer added.

In a similar vein, de Mailly Nesle said Axa’s marine book could be affected by the continuing conflict “because of some vessels that are also retained in some of the Ukrainian harbours”.

Lastly, Axa additionally believes it could see claims through its crisis management line. This provides “specific policies which we sell to a limited number of customers to cover the impact of war, terrorism or riots, for instance”.

De Mailly Nesle said: “Some of those policies were triggered because of the war in Ukraine.”

Axa confirmed that it will be keeping a close eye on the risks arising from the conflict and reviewing its products closely with the war in mind.

“Obviously, we will review this provision regularly and if need be, we will adjust,” de Mailly Nesle said.

Solid first half

It comes as the insurance giant reported an uptick in commercial lines revenue for the first six months of the year.

Total P&C revenue across Axa increased by 1% in the first half of 2022 to reach €29.3bn – Frédéric de Courtois, Axa’s group deputy chief executive, explained that this result has been driven by a reduction in natural catastrophe exposures and reinsurance – while overall commercial lines growth amounted to 4% in 2022’s first half, to reach €17.5bn (£14.6bn) in revenue.

The P&C combined operating ratio (COR) for H1 2022 was 93.7%.

Courtois attributed commercial lines growth to higher prices.

Buberl continued: “In [an economic environment] which has become highly uncertain, we remain very watchful and vigilant and take all necessary measures. The group is in a position of strength because it is resilient and well positioned in the current environment.

“Our business profile is resilient to economic cycles, as this first half has showed. We are also in a position of strength to resist the volatility in the market thanks to our financial robustness and thanks to our transformation of business profiles over the last few years.

“We are also capable of proactively managing inflationary pressures by increasing our prices in a targeted manner, while also building upon our reserves and the complimentary fit across our business lines.

“Remember that the increase in interest rates is very good news for clients as well as for our own investments.”