Coface’s exposure to the Russian invasion of Ukraine is equivalent to 5 billion euros (Deutsche Bank)

According to Deutsche Bank, at the end of February, the total exposure of the credit insurer Coface to the Russian invasion of Ukraine amounted to 5 billion euros, with 95% from Russia and 5% from Ukraine, this which is equivalent to less than 1% of the group’s total insured exposure.

The bank explained that this exposure has an average duration of 6 to 12 weeks and given the current environment, and that it expects it to decrease significantly in the coming weeks.

Of this €5 billion exposure, approximately half is domestic exposure, the other half being export activity.

Within this second half, about 40% is for pharmaceutical and agricultural lines, including pharmaceutical companies that send drugs to Russian hospitals, which are generally considered quite resilient.

Given the depreciation of the RUB over the last few weeks, the domestic exposure has probably been reduced to EUR 1.0-1.5 billion.

The bank noted that at this stage, however, while there may clearly be some pressure from an economic slowdown in Russia, it does not believe the losses are expected to be so large.

The other half of the business is potentially more relevant. Although the total potential insured risks here amount to 2.5 billion euros, Deutsche Bank estimates that many companies have only used 50-60% of their limits, i.e. the risk real potential insured here is closer to 1.5 billion euros.

Typically, under normal market conditions, losses are 10 basis points of insured exposures, with the bank estimating that in a medium stress scenario this could extend to 1%, but in a higher stress scenario severe, it could reach 5%.

The bank further explained that in real money terms, this more severe stress equates to 75 million euros before tax, or 30% of current consensus expectations for 2022 earnings. rise to 100-125 million euros.

For reference, this appears broadly aligned with Allianz’s current forecast for Euler Hermes of potential losses in the triple-digit millions and the relative exposures/scale of the two businesses.