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Editorial

What many long thought unthinkable has now become reality: war in Europe has been raging since 24 February 2022. In addition to the inconceivable human suffering, the Russian attack on Ukraine is also exacerbating economic uncertainties worldwide. Many issues that have had a significant influence on company development in recent years are now taking a back seat – the COVID-19 pandemic and BREXIT are but two examples. Although the UK left the EU barely two years ago, it has already disappeared from public consciousness.

Whether directly or indirectly, the effects of the war in Ukraine are being felt by almost all businesses. Internationally positioned companies with links to Russia, Belarus and Ukraine are having to rethink their presence in these countries as well as compensate for their loss of sales, or organise alternative locations for production and distribution facilities no longer in operation. Supply chains, already under strain thanks to the COVID-19 pandemic, are set to come under further pressure. Supplies and raw materials, expensive and in short supply even before the war, have suffered a further spike in prices. Energy prices are through the roof, threatening the competitiveness of businesses. It is not only energy-intensive production companies that are being affected: high gas and electricity prices are depriving many companies of the financial scope they need to make the necessary investments for the future.

These price increases and the inflation this brings are also having a direct impact on the insurance industry. They are making the settlement of individual claims extremely expensive. Reconstruction and repairs are not only taking longer, they are also more costly on account of rising material and labour costs. This trend is being further accelerated by the climate-related increase in loss figures. The effects of storm Bernd have not yet been overcome.

Special mention should be given here to “social” inflation which is also causing higher loss expenses in the financial and liability insurance lines. Anti-business sentiment, the strengthening of the litigation funding industry and statutory indemnity levels and liability regimes are combining to produce significantly higher indemnity payments and legal fees, hitting not just companies with high US exposure.

The insurance industry is responding to these scenarios by showing a reduced appetite for risk. This is a trend that had already begun in previous years and is continuing this year, as evidenced in particular by increases on the premium side and reductions in insurance capacities for individual risks. It should, however, also be noted that there are no signs of a truly joined-up approach within the insurance industry. This explains why it is becoming increasingly challenging to ensure the usual, tried-and-tested insurance protection.