At around $400m, marine loss from the Russia-Ukraine war seems insignificant compared with the aviation loss, where more than 400 aircraft worth almost $10bn, have been stuck in Russia after lessees did not return the jets, according to Miller’s marine insurance market report.
The marine insurance market expects to be impacted by the Russia-Ukraine conflict, with the future of the Black Sea Grain Initiative looking bleak following Russia’s refusal to extend the deal beyond 17 July.
Russia’s specific demands to extend the date include the reconnection of the Russian Agricultural Bank (Rosselkhozbank) to the SWIFT banking payment system, that supplies of agricultural machinery and parts to Russia be resumed, and that restrictions on insurance and reinsurance are lifted.
According to Miller, the chances of any one of these demands being agreed, let alone all of them, looks remote. At this stage, analysts believe that Ukraine will be forced to export grain almost exclusively via its ports in the Danube river.
“The impact of the wording imposed by reinsurers in contracts renewing at the end of 2022 has effectively excluded the aggregating of multiple vessels caught in the same war risk event,” the report stated.
Analysts explained: “For example, the aggregating of losses due to deprivation at the date of the incursion into Ukraine. Each vessel is now deemed to be a separate loss. The impact of that wording change has shifted exposure previously borne by the reinsurance market, back into the direct market.
“With far reduced reinsurance coverage, direct underwriters have been forced to reduce their average line size on the risks that they do write, resulting in capacity reduction for war risks.
According to Miller’s report, there is more than adequate capacity to cover all the vessels in the world fleet, but in this case, with reduced capacity, the laws of supply and demand have dictated higher premiums for war risks than might otherwise have been the case.
Those insurers who have continued to maintain high levels of war risks premiums have, so far, have benefited from this as they have been rewarded due to a continued absence of material loss, as the fear of loss exceeds the reality, analysts noted.
Miller concluded: “Whilst the change in the reinsurers’ wording is impacting marine hull business, it is also affecting other specialty lines, particularly aviation.
“The marine loss from the incursion into Ukraine is estimated to be around the $400m mark, however this pales into insignificance when compared with the aviation loss, where more than 400 aircraft, worth almost $10bn, have been stuck in Russia after lessees did not return the jets.”