With vessels still stranded in Ukrainian ports, there is a very real risk of marine hull claims following the conflict’s one year anniversary this month
By Jon Guy
There are some concerned faces in the offices of the London market’s marine underwriters right now.
Not only have insurers seen reinsurers walk away from any support for ongoing marine war risks, but 24 February 2023 will mark the one year anniversary of Russia’s invasion of Ukraine.
While there is sure to be a huge amount of media coverage on the date, for marine insurers, it has the potential to be a very costly anniversary.
When Russia’s armed forced swept into Ukraine, its navy blockaded Ukraine’s ports, trapping around 80 vessels that were either loading or unloading at the time.
With the approaches to the ports then heavily mined and Russian warships patrolling the Black Sea, the vessels were effectively trapped.
While the United Nations (UN) and the London market negotiated a safe corridor for the export of grain and wheat from Ukraine towards the end of 2022, the International Maritime Organization (IMO) – part of the United Nations which regulates shipping – predicted that around 60 vessels are still trapped.
Attempt to mitigate claims
Under marine hull insurance policies, the inability for an owner to operate their insured vessel for a period of 12 months allows them to submit a claim for the complete loss of the vessel. On 24 February, for many vessel owners this year-long wait is up.
According to a November 2022 event organised by Association of Average Adjusters and the International Underwriting Association, the insured costs of those vessels are estimated to be in excess of $800m (£650m) - and that does not factor in the cost for the loss of any cargo.
It is little wonder, therefore, that the International Union of Marine Insurance (IUMI) - which represents the worlds’ marine underwriters - has issued a hearty welcome to news that the IMO has increased its efforts to find a way to free the vessels.
“With the anniversary of the Ukraine conflict approaching, more than 40 vessels are still stranded in various Ukrainian ports,” the organisation said in a statement last week (February 2023).
“IUMI welcomes the efforts by the IMO to free these vessels and hopes that sufficient assurances can be received from both Russia and Ukraine to enable the vessels to leave safely.
“Since the summer [and] the UN’s Black Sea Grain Initiative, Russia has allowed bulkers to call at three ports in Ukraine to export corn, wheat and other foodstuffs - but this agreement has not permitted other trapped vessels to leave other Ukrainian ports.”
The IMO’s secretary general, Kitack Lim, said he is making every effort to engage with the Russian government. Underwriters will be praying that the coming days will reap a breakthrough and, with it, the removal of a potential flood of claims at the start of March.