A number of shipping insurers changed their policies for 2023 to exclude claims related to Russia’s war in Ukraine, indicating the industry’s growing concern about losses caused by the conflict.
At least 12 of the 13 organizations that comprise the International Group of P&I Clubs — the primary insurer of risks such as collisions and spills — have changed their policies to exclude claims arising from Russia’s recent invasion of Ukraine. The 13 clubs are mutuals, meaning they are owned by the shipping companies whose fleets they serve.
Insurance is an important part of merchant trade, and without it, some vessel owners and companies may be wary of going to Russia or Ukraine.
The new terms apply to what are known in the industry as non-mutual, or fixed premium, war-risk policies — policies in which a higher-than-expected level of claims cannot be recovered from a club’s members later.
The change is the latest sign that reinsurers’ broad retreat from covering war-related claims is affecting coverage for vessels serving Russia and Ukraine, though some key policies remain in place. Earlier this month, some of the world’s largest reinsurers announced that they would cease underwriting war-related risks.
These changes in coverage are the result of those reinsurers’ decisions.
“Due to the impact of losses from the Russian/Ukrainian situation affecting the availability of global insurance and reinsurance capacity, the Club’s reinsurers are no longer able to secure reinsurance for war risk exposure to Russian, Ukrainian, or Belarus territorial risks,” UK P&I, one of the International Group’s 13 members, wrote to its clients in a notice of cancellation.
“As a result, reinsurers have advised the club that they will no longer be able to support the club for this exposure,” it added.
Fixed premium insurance products are frequently tailored to smaller ships, including those transporting dry commodities such as grains.
Large oil tankers, on the other hand, for which spillage claims can run into the billions of dollars, are typically covered by poolable policies, in which large losses are eventually offset by higher premiums paid by all members. Coverage for poolable policies is still in place.
The new exclusions also remove much of the war-related coverage obtained by charterers or commodity traders who hire vessels. These liabilities may include vessel loss and damage, as well as collision, pollution, salvage, and fines.
It means that if a ship is diverted to an unsafe port, the company that hired it may not be covered if something goes wrong.