Investment bank Peel Hunt said in a briefing note that it was not clear whether existing insurance contracts would become "null and void" or effectively suspended under proposed sanctions against Russia outlined last week.
HM Treasury said on March 3 that insurers should no longer take out new business with Russian clients for aviation or aerospace cover. The Bank of England confirmed on Tuesday that the sanctions would also include a ban on paying out on claims under existing contracts.
Peel Hunt said that insurance companies should take a cautious approach to financial reserves they have kept aside for paying out on claims made on the affected Russian policies.
"Under some sanction regimes, claims payments are deferred," Peel Hunt said. "In this scenario we believe insurers may need to set up a reserve anyway and set aside sufficient funds in case claims need to be paid in the future. Under other sanction regimes, coverage is prohibited and policies are canceled."
Britain introduced the sanctions in a wider package of financial penalties on Russia following its invasion of neighboring Ukraine. The sanctions were initially geared toward the aviation and space industries, but the government has signaled that it is considering further sanctions.
Bank of England deputy governor Sam Woods said when he appeared at the House of Lords Industry and Regulators committee on Tuesday that there might be "more action" — further insurance restrictions — if the government introduced energy sanctions on Russia.
Peel Hunt added on Wednesday that "further sanctions are likely to be rolled out in other classes that are relevant to the Lloyd's market" including energy and marine.
Lloyd's of London did not respond to a request for comment. The Prudential Regulation Authority and HM Treasury have also been approached for comment.
--Editing by Ed Harris.
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