CAC Specialty said on Friday that underwriters across the world are introducing blanket exclusions for losses from the three countries or are reluctant to offer cover at all.
The cover, known as representations and warranties insurance, is increasingly being taken up globally in mergers and acquisitions transactions. It protects the buyer against losses caused by a breach of contract by the seller.
CAC Specialty, based in Denver, Colorado, said that underwriters are "actively trying to avoid" providing cover for businesses with links to Russia, Belarus and Ukraine, where losses are more likely.
"Markets are mitigating or eliminating their exposure to risks" in the three countries, the company said in a report. "Underwriters' responses to deals touching the region range from outright declinations to severely heightened underwriting scrutiny."
There was additional scrutiny on businesses seeking the cover even before the war in cases where they or the seller have links with Russia, the company said.
Underwriters are now looking at every deal in fine detail to ensure that there is no risk from Russia's war in Ukraine, or a knock-on effect from sanctions. Insurers are specifically looking at exposure in supply chains, ownership structure and whether clients, staff or information technology infrastructure are located in the affected countries, CAC Specialty said.
"Even with thorough diligence, CAC believes that — at least in the near term — it will be incredibly difficult to obtain a quote where a target has material operations or exposure in these countries," the report added. "The best-case outcome (again, at least in the near term) will be a quote with broad exclusions for all such operations and exposure."
Insurance broker Marsh said on March 7 that more than 63,000 M&A transactions were completed globally in 2021, worth a total of $5.9 trillion.
The broker added that there has been an increase in demand for transactional risk insurance — a broad class of M&A cover, which includes representations and warranties insurance.
Marsh said in a report last month that it placed around $81.2 billion worth of transactional risk cover last year, an increase of almost 70% on the $47.8 billion it sold in 2020.
--Editing by Joe Millis.
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