The ongoing war in Ukraine and the sizable losses it has caused to the re/insurance market, have pushed many industry bodies to make changes in war reinsurance programs.
Because of this, some experts are predicting fairly seismic changes to the war market in 2023, according to Gallager’s recent marine market report.
However, the insurance broker is hopeful that, given the historical strong performance of the marine war portfolio, this scenario would not materialise in such a substantial manner and the environment to remain as favourable as possible for owners and charterers.
Ukrainian ports have been closed for vessel entry and exit since the day after the Russian invasion. This resulted in around a hundred vessels trapped in ports and up rivers.
The full value of vessels trapped is unclear, but it could be as much as $800 million to $1 billion.
According to Gallagher, since the initial opening of the grain transit corridor in July, many of these vessels have managed to sail out, reducing the total loss exposure for the market.
Yet, there are still several vessels trapped in closed ports, some of which have already triggered total losses under their war coverage, analysts noted.
Gallagher added: “ 7 day premiums for vessels calling to Ukraine or Russia Black Sea ports are extremely high and calls to any ports in Russia are subject to the continually changing sanctions regimes of the major Western powers.
“Furthermore, there is ongoing uncertainty around the operation of the grain corridor where Russia has already once temporarily suspended support. Aside from the obvious risk of physical damage to vessels, Underwriters are most anxious about the risk of detainment.”
Russia’s unpredictability is constant threat of detentions or confiscations of vessels, as well as closing the grain corridor blocking vessels in Ukraine from leaving.
This can potentially give Underwriters a sizable aggregate exposure if a quantity of vessels are blocked or detained simultaneously, Gallagher highlighted.
Analysts said: “There are concerns around the availability of reinsurance for Russia / Ukraine trade following treaty renewals at 1/1. As such there is significant uncertainty around the future likely costs for vessels wishing to call there.”
Additionally, Gallagher also noted the removal of the Indian Ocean High Risk Area (HRA), a decision industry bodies made following a decade of effective threat reducing counter-piracy operations.
“It remains to be seen whether the Joint War Committee removes the area from their own list of excluded areas for War Risks insurance, but historically they have usually followed suit,” Gallagher added.
