Russian and Ukrainian Strikes Are Raising War Risk Insurance Costs
War risk insurance is one of the biggest factors affecting whether shipowners will trade in a conflict zone, and high insurance rates are an effective means of deterring vessel traffic. When excessive, it adds hundreds of thousands of dollars in cost for every week spent in the coverage area. The recent intensification of conflict in the Black Sea has raised the stakes for insurers, and the costs are getting passed on to shipowners: costs are now as high as one percent of hull value for a port call in Ukrainian or Russian ports in the region, according to Bloomberg. For a newer Suezmax, war risk cover alone could cost $800,000 per voyage.
The rates are changing rapidly based on events on the ground, industry outlet BeInsure reports, and insurers are reviewing their offered contracts on a daily cycle. Fresh attacks happen every week, both at Odesa on the Ukrainian side and Novorossiysk on the Russian side.
On Tuesday, Ukrainian drones hit two Greek-owned tankers near the Caspian Pipeline Consortium terminal, the Matilda and the Delta Harmony. The two ships were operating within compliance with Western sanctions, and were in the area to pick up crude piped across the border into Russia from fields in Kazakhstan. One of the vessels was reportedly chartered by American oil major Chevron. Both were in ballast at the time of the strike, and both sustained only minor damage on deck. No injuries were reported.
The attack was unusual in the selection of targets, as Ukraine has previously held off from striking compliant tanker tonnage, even though it has previously attacked the CPC terminal itself.
In the wake of the attack, Greece's shipping ministry advised owners to take extra precautions near Russian Black Sea ports. In guidance seen by Reuters, the ministry recommended that ships should "proceed with an updated threat assessment for commercial ships located in the Black Sea and the maritime areas close to it."
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Previously, Ukraine focused its attacks on terminal infrastructure, pipelines, offshore production platforms and shadow-fleet tankers. The vessels in the shadow fleet generally use obscure or second-tier insurers, as the leading marine insurance companies are all based in the G7 nations, where sanctions on Russia prohibit the act of insuring certain market-rate Russian oil cargoes. The shadow fleet is already a high-risk, under-insured or uninsured category; strikes on compliant vessels are a departure from the pattern, and a new risk factor for Western insurance companies.
The situation is just as risky on the western side of the Black Sea. Russia has repeatedly hit terminals in and around Odesa, damaging vessels and injuring multiple crewmembers. On Thursday, a seafarer was injured in a Russian strike on the port of Chornomorsk, Ukraine; several containers were damaged, and a nearby vessel sustained minor damage.
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