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Cedric Stephens | Geopolitical confrontations and attitudes to risk

The economic impact of the Russia-Ukraine conflict will be felt around the world. Many developing countries are already struggling to recover from the COVID-19 pandemic.

These statements appeared in an article, which was published in last Tuesday’s Gleaner. They were made by Jayati Ghosh, executive secretary of International Development Economics Associates and professor of economics at the University of Massachusetts, Amherst.

Last Wednesday’s Jamaica Observer echoed a similar idea in three words: ‘Dark Days Ahead.’ Its headline summarised Opposition Leader Mark Golding’s thoughts about the country’s economic prospects in the context of the Government’s 2022-23 Budget and the projected economic fallout from what the Russian president calls the “special military operation” in Ukraine. Mr Golding commented that the Jamaican Government’s $912 billion Budget “is a fantasy that lacks any real strategy to protect the country from the dangers of the prolonged novel coronavirus pandemic as well as the commercial impact of Russia’s invasion of neighbouring Ukraine”.

I agree with both comments. The imminent threats facing the local economy are real and grounded in the pandemic and Russia’s invasion of Ukraine. Some overseas analysts see the dangers as being even more frightening: the possibility of nuclear war.

Today’s column will avoid discussion on the ongoing geopolitical confrontation and the possible economic impacts. It will focus on Mr Putin’s attitudes to risks and discuss the effects of the economic sanctions on Russia’s insurance industry. The expectation is that these insights will broaden readers’ understanding of risks and insurance. An individual’s attitudes to risks influence their behaviour and decisions about insurance as I argued in my January 30, 2022, article ‘Applying behavioural economics to insurance’.

One of the lessons that COVID-19 has highlighted is that perceptions and attitudes to personal and other risks are not simply black or white. There are many variations in between.

Putin, according to a recent Voice of America article, appears to relish courting, calculating, and taking risks. In 2019, it said that the editors of Britain’s Financial Times newspaper conducted a 90-minute interview with the Russian leader. They noted: “Just before midnight, Vladimir Putin perks up at the mention of the word ‘risk’. It encapsulates the man and his 20 years in power.

“His interviewers talked with him near a bronze statue of Russia’s legendary and expansionist Tsar Peter the Great, one of Putin’s heroes who carved out a Russian empire in the 18th century. They tried to explore whether the Russian president is a rash gambler or a calculating, and more cautious, risk-taker. But he was elusive and teasing.

“They asked him if his appetite for risk-taking had increased with each passing year. He responded: ‘It did not increase or decrease. Risk must always be well-justified. But then Putin cited a popular Russian phrase: ‘He who doesn’t take risks never drinks champagne’.”

The global insurance market is controlled by 10 countries. Their combined market share amounted to 80.4 per cent of total premiums in 2020. The rest of the world accounted for 15.6 per cent. The share of the United States and China, the world’s two biggest economies, was 50.6 per cent. Russia’s share of the global market is included among the rest of the world.

The economic sanctions imposed on Russia following its invasion of Ukraine have led to the withdrawal of international insurers and reinsurers. In response, President Vladimir Putin recently signed a law prohibiting Russian insurers from completing transactions with insurers, reinsurers, and brokerage firms from what it called “unfriendly states”. Overseas analysts have said that “it could be a tricky time for insurers in the country as this law effectively narrows their options and greatly reduces the volume of available and diversified reinsurance capacity”.

In the meantime, in Ukraine, none of the estimated US$150 billion damage to public infrastructure and private property damage is likely to be covered by insurance.

Most insurance policies typically exclude damage caused by war. These numbers exclude estimates for the loss of thousands of lives, the toll of pain and suffering, and the impact around the world. “It’s not the armies that are evil, [but] wars and the people who start them.”

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: or

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