A sign is seen engraved on the Treasury building in London, Britain, March 1, 2021.
A sign is seen engraved on the Treasury building in London, Britain, March 1, 2021. Reuters / TOBY MELVILLE

Britain will ban Russian companies from the multi-billion dollar aviation and space insurance market in London, the world's largest commercial and speciality insurance centre, the finance ministry said on Thursday.

Russian companies in the aviation or space industry will be blocked from accessing British-based insurance or reinsurance services directly or indirectly, the ministry said.

"The UK Government will bring in legislation to prohibit UK-based insurance and reinsurance providers from undertaking financial transactions connected with a Russian entity or for use in Russia," the Treasury department said.

"Further details of the legislation will be available in due course."

The sanctions only apply to aviation and space insurance but the British government has said it is constantly looking at new ways to isolate Russia.

The move on aviation insurance will leave Russian commercial airlines scrabbling to get cover elsewhere. Industry sources say this could include from Chinese reinsurers, while other Western insurers are likely to hold back from the business, fearful of other countries imposing similar restrictions.

The ban could lead to a sharp rise in aviation premiums because of the loss to the insurance sector, an aviation industry executive said.

Russian airline Aeroflot is insured in the London market by a consortium led by underwriter Global Aerospace, two sources told Reuters.

Global Aerospace, which is backed by Berkshire Hathaway and Munich Re, did not respond to a request for comment.

Companies from around the world use Lloyd's of London and other businesses operating in London for aviation insurance and reinsurance.

"We are in regular communications with the UK government and international regulators, and are working closely with the Lloyd's market to uphold the implementation, at pace, of sanctions applied by governments around the world," said Patrick Tiernan, Lloyd's Chief of Markets.

Aviation is one of the largest sectors at Lloyd's, along with marine and energy insurance.

Marine, aviation and transport at Lloyd's reported gross written premium of three billion pounds ($4.01 billion) in insurance and 1.5 billion pounds in reinsurance in 2020.

The International Underwriting Association, which represents London commercial insurers outside Lloyd's, was awaiting more detail on the legislation, it said in a statement.

($1 = 0.7472 pounds)

(Writing by Kate Holton and Carolyn Cohn; additional reporting by Jamie Freed and Tim Hepher; Editing by David Goodman, Jane Merriman and Emelia Sithole-Matarise)