The Association of Average Adjusters has warned that the war in Ukraine is likely to see a wave of marine claims with up to $1 billion worth of vessels trapped in the country’s waters due to the Russian blockade.
Speaking at an event organised by the International Underwriting Association delegates were told marine markets face a profusion of “total loss” claims for trapped ships early in 2023, one year after the shut-down of Ukrainian ports.
Ukrainian ports have been closed for vessel entry and exit since 25 February, 2022, the day after the Russian invasion, and mines are reported to have been planted, effectively blocking as many as 100 vessels in ports and up rivers. The full value of vessels trapped is unclear, but it could be as much as $800 million to $1billion.
However while warnings were being issued in London, talk in Singapore was about the hundreds of aircraft which have been effectively seized by the Russian Government with the costs running into billions for those companies which own the aircraft and lease them to airline operators across the globe.
On the face of it this is quite simply a war loss and as such those war hull insurers are facing a huge amount of claims.
However, this is the insurance industry and nothing it seems is a simple as that. As the industry staggers from the business interruption disputes, which eventually ended up in the courts, they are now likely to be heading back to the courts to contest who should actually be making the payments.
In a move reminiscent of the events following the Red Shirt protests in Thailand in 2010, it seems the war insurers believe there are clauses in some of the other covers that the companies have taken out which may stretch to the losses they now face. This it seems may give them the get out clause to push the claims onto other markets.
In 2010 when the Red Shirt demonstrators destroyed a shopping centre in the Thai capital Bangkok, the market went to war with itself. It seemed that the owners had two policies each of which potentially could be deemed to be liable for the losses.
Cue a very unseemly dispute with each side claiming that the other policy should be triggered first and as such should pay the claims.
It seems there is now a similar situation brewing over the aircraft and it is likely to end in court.
Rather than the various underwriters getting together to thrash out how, as an industry, they can meet the needs of the client which took out the coverage in good faith, they are set to unleash the lawyers and the awful optics it will generate.
This obviously comes two decades after the dispute over the various policy wordings in the insurance for New York’s World Trade Centre prompted regulators to demand contract certainty, over what was covered and for how much.
The only clarity is that the industry seems never to be able to learn from its previous mistakes!!!
Editor, Emerging Risks