Insurers Marsh, Lloyd’s & Ukrainian State Banks Launch War Risk Ship Insurance Programs

Insurance broker Marsh, Ukraine’s state banks, and Lloyd’s of London insurers have reportedly launched a program for cutting down the cost of claims for damages to vessels and crew members transporting grain via the Black Sea corridor, Marsh mentioned on Wednesday.

Kyiv also launched a humanitarian corridor in August 2023 for vessels bound for Asia to circumvent a de facto block in the Black Sea after Russia quit a UN-brokered agreement that had assured Kyiv’s seaborne exports even during the war.

The initiative will be underwritten by Lloyd’s of London insurers, which will offer $50 million in hull war risk insurance and $50 million in protection and indemnity (shortened P&I) insurance for every voyage.

Vessels generally have P&I insurance, which mainly covers third-party liability claims, including ecological damages and injuries. Separate hulls, as well as machinery policies, cover ships against physical damage.

The State Export-Import Bank of Ukraine (abbreviated Ukreximbank) and state-owned lender dubbed Ukrgasbank will offer standby letters of credit, each confirmed by DZ Bank (Germany), Marsh stated in a statement.

The facility is backed by Ukraine’s Ministry of the Economy. Ukrainian Prime Minister Denys Shmyhal said late on Tuesday that the arrangement involved 14 insurance companies.

According to Marcus Baker, Marsh’s worldwide head of marine and cargo, the scheme has the approval of the British government.

For (commercial firms) to know that the UK government is standing behind this has reportedly aided in giving the credibility that it requires, he mentioned.

According to industry insiders, war risk insurance premiums have climbed to as much as 3% of a vessel’s value after a missile destroyed a merchant vessel in Ukraine’s port of Pivdennyi last week.

Baker said the program could reduce that cost to as little as a third of the existing pricing.

He mentioned that Ukraine’s financial backing for the scheme indicates that insurers will be able to charge lower than current super-high rates for travelling via the corridor.

The reduction, per Ukraine’s First Deputy Prime Minister Yulia Svyrydenko, will cut the overall cost of grain insurance by roughly 2.5 percentage points, enabling grain traders to save up almost 100-140 hryvnias per metric tons of cargo and agricultural producers to save around 4 billion hryvnias.

The initiative will cover goods travelling via Ukraine’s Danube ports and Odesa, Pivdennyi, and Chornomorsk. Per Baker, it is controlled by Lloyd’s syndicate Ascot.

Marsh also operates a separate facility that safeguards the region’s grain cargo. Ascot serves as the program’s principal insurer.

Reference: Reuters

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Source: Maritime Shipping News