Innovation in insurance via collaboration and investment will be essential to address complex challenges that will emerge from the Ukraine war, Lloyd’s and Aon say.

Insurers have an opportunity to develop new products and ways of sharing risk to help businesses navigate the uncertainty, says a joint Ukraine: A conflict that changed the world report, based on in-depth interviews with 75 risk experts.

The report found the conflict’s impacts are highly interrelated, for example the geopolitical tensions triggering a spike in cyber attacks, which in turn could impact inflation and market volatility.

Lloyd’s CEO John Neal says the conflict has caused a range of interconnected risks across areas like energy, cyber and supply chains and a proactive and forward-thinking approach will be key to building resilience against the fallout.

“Lloyd’s will deploy its expertise, resources, and risk solutions to support that goal,” he said.

Covid, climate change and the invasion of Ukraine have “all highlighted the systemic frailties embedded in our economies and societies,” it said. “Our approach must be similarly fused. Insurance can play a leading role in plugging protection gaps and building resilience but it cannot do it alone.”

It emphasises the need for insurance, as a key risk transfer mechanism, to help businesses mitigate these interrelated risks and build organisational resilience. The knock-on effects of the crisis will “last a lifetime,” and insurance’s central position offers it a unique ability to convene business, governments, regulators and investors for a coordinated approach to building societal resilience.

The insurance industry has a “formidable toolkit” to remove risks from balance sheets and reduce exposure to the crisis, and to provide advice on risk mitigation and management, and mobilise capital to support rebuilding.

"Insurers should pool their expertise, resources and capacity to drive the product innovation that can help businesses respond and alleviate stresses on the global economy,” the report says, adding, the insurance market will be well placed to provide business continuity, trade disruption, and transport-affiliated coverage, such as marine hull and cargo.

Directors’ & Officers’ (D&O) insurance will likely see increased demand, and the report found the ability of businesses to diversify and ‘hedge’ their portfolios and supply chains to reduce dependence on single suppliers will be key to minimising risk exposure.

For food security, insurers and brokers can help with production, processing, and distribution concerns, including protecting against agriculture risks, supply chain disruption, commodity price volatility and reputational risks, and also product recall and contamination risks.

Energy security and reputational concerns will be a key factor for all sectors, with reduced food and energy supply – Russia provides a fifth of the world’s wheat and 40% of Europe’s gas – and higher business costs associated with reshoring supply chains expected.

Aon Global Chairman of Reinsurance Solutions Dominic Christian says the conflict highlights that a specific risk does not exist in isolation.

“Our ability to manage deeply related and increasingly volatile risks requires careful thought, detailed planning and effective execution,” Mr Christian said.

Since Russia’s incursion in February, millions have been forced to flee their homes, land has been left destroyed or unusable and many thousands have been killed.

"What started as a regionally confined conflict has quickly morphed into an economic, societal and environmental crisis with truly global repercussions. The response has had to be similarly global to deal with the fallout,” an introduction to the report from Mr Neal and Mr Christian said.

“Its impacts will remain with us for a long time to come. We must work to understand and navigate the complex risk terrain it continues to shape.”