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Quarter of Russian crude oil shipments in December used western insurance

29th December 2022 - Author: Kane Wells

According to a Financial Times analysis of shipping and insurance records, around a quarter of Russian seaborne crude oil shipments since restrictions started on December 5 were insured by western companies.

Based on an analysis of data from Kpler, the Financial Times report states that 18 Russian crude oil cargoes have been loaded onto western-insured tankers since the price cap started on December 5, representing around a quarter of the 63 vessels carrying Russian crude between then and December 25.

Of this, nine vessels were destined for India, six were headed for China and one to Turkey, the data showed. The Financial Times adds that each vessel had current insurance coverage from a western insurer.

Four other vessels carrying Russian crude insured by western companies were bound for Bulgaria, which, due to the dependence of its refineries on Russian crude, is exempt from the EU’s ban on importing Russian oil until the end of 2024.

Meanwhile, The financial Times suggests that in the first three full weeks of December, Russia exported approximately 50mn barrels of its own crude via the sea, compared with 67mn barrels in the same period in November.

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The new data come a day after Russian president Vladimir Putin signed a decree, which comes into force in February and will remain effective for five months, stating that the Kremlin will ban the sale of the country’s crude and crude-related products under contracts that “directly or indirectly imply a price cap mechanism”.

The decree also suggests that it “may grant special permission” in certain circumstances for some purchases under the cap to continue, a wording which the Financial times suggests potentially paves the way for Russia to continue to sell crude to producers in markets such as India and China.

Matthew Wright, analyst at Kpler, said the decline was due to “a fall in exports from eastern Siberia due to weather conditions, and an increase in refinery activity in Russia, which has diverted crude away from exports.”

Further, the Financial Times report states that despite the price-cap mechanism allowing western companies to continue to underwrite such cargos, it has become harder for shippers to get some types of insurance.

Global protection and indemnity insurers issued amendments on December 23 for certain policies, including charterers’ liability cover, excluding losses coming from the conflict “or any expansion” of it.

The American Steamship Owners Mutual Protection and Indemnity Association, Inc. (the American Club) recently announced that its reinsurers have served a notice to cancel certain war risk exposures related to the conflict between Russia and Ukraine.

While the American Club has not disclosed which of its reinsurers have decided to pull their coverage related to the conflict, it was reported earlier this month Hannover Re and Munich Re are among reinsurers who had warned to cease underwriting any kind of risks related to the conflict in Ukraine from the start of next year, with other reinsurers thought to be taking a similar approach.

The London market’s year-end renewals are approaching their deadline, with market participants reporting very low appetite for reinsurers to extend so-called war risks insurance for the region.

The Financial Times report notes that one senior person in the market, speaking on condition of anonymity, said broadly written Ukraine exclusions demanded by reinsurers were causing “huge problems” for firms trying to insure assets in the region, many of whom will have to underwrite “net”, meaning without reinsurance cover.

The report adds that this could also cause complications for shipping Kazakh oil, in particular, the Caspian Pipeline Consortium, which moves oil from landlocked Kazakhstan to the Russian port of Novorossiysk for shipment across the Black Sea.

Since December 5, Kpler data show the CPC terminal has loaded 38 vessels, all of which held western insurance.

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