Marine insurers in a coverage war with reinsurers as risks increase

Ukrainian president Volodymyr Zalenskyy visited the UK this week, as he continues to seek support for the country in its fight against Russia.

However, for marine insurers the ongoing war in Ukraine has left the sector facing major challenges.

The International Union of Marine Insurance (IUMI) held its annual winter meeting London this week. The event brings its executive committee together with traditionally the biggest issue on the agenda to decide the theme for its annual conference in September.

This year the meeting and the sector’s outlook has been rocked by the hard line approach by the reinsurers who have in effect walked away from the marine war risks market having faced a year of huge upheaval and sizable claims arising from the Russian invasion of Ukraine.

A considerable proportion of the world’s grain has been trapped in Ukraine and Russia courtesy of trade sanctions and the blockage of the Ukrainian Black Sea ports.

The London insurance market negotiated a specific insurance facility which would allow grain exports from Ukraine via a safe channel, which is being overseen by an international coalition. It is much needed with hundreds of millions facing hunger had the Ukrainian gran not been delivered.

But it is only half the story.

The end of the month will see the world mark a year since the Russian invasion and with the 12 month anniversary will come the ability for the owners of over 40 vessels trapped in Ukrainian ports to declare the trapped tonnage total losses. No specific hull value has been put on those vessels but a ballpark figure of $700 million is viewed as not too far wide of the mark. In terms of the cargoes which have been stranded the figures are far more fluid. They range from $400m to over $1 billion and the marine cargo market are set to shoulder the burden of those claims.

For some it is little wonder that reinsurers, faced with taking a share of the losses, have in effect cut and run, refusing to renew cover, given there is no end in sight in Ukraine and Iran is already threatening the safe navigation of the Persian Gulf in response to tougher international sanctions.

It remains the case that for the maritime sector to operate it needs to be insured. Many ports around the world will not allow vessels access to replenish supplies and fuel without the requisite insurance covers.

Talk of a growing “shadow fleet”, created to move goods banned by international sanctions continue, but the Russian fleet constitutes around 2% of global tonnage so for insurers the impact of sanctions has and continues to be limited.

The issue is the ability to meet the needs of the world’s shipowners and charterers, given insurers are now faced with assuming much if not all of the risk, should those vessel be transiting areas that are deemed to be a war risk.

While not exactly all at sea, the marine insurance sector is having to navigate waters which have seldom been as stormy.

Jon Guy, Editor

Emerging Risks

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