Following a retreat from the area by reinsurers due to significant losses, ship insurers announced they are discontinuing war risk coverage throughout Russia, Ukraine, and Belarus.
After being hit this year by losses associated with the conflict as well as from Hurricane Ian in Florida, reinsurers—the companies that insure the insurers—typically renew their 12-month contracts with insurance clients on January 1. This gives them the first chance to reduce exposure since the start of the war in Ukraine.
P&I (protection and indemnity) clubs American, North, UK, and West have recently posted notices on their websites stating that as of January 1 they will no longer be able to provide war risk coverage for some liabilities in the region.
Around 90% of all ocean-going ships in the world are insured by the clubs, one of the largest P&I insurers.
On December 23, UK P&I Club stated that the problem had developed because retrocession, or reinsurance for reinsurers, was not readily available.
“The Club’s reinsurers are no longer able to secure reinsurance for war risk exposure to Russian, Ukrainian or Belarus territorial risks,” it said.
On December 23, American P&I announced that it was canceling its own insurance as a result of receiving a “notice of cancellation” for the area from its war risk reinsurers.
P&I insurance, which covers third-party liability claims including environmental damage and injury, is typically carried by ships. Vessels are protected against physical damage by separate hull and machinery insurance.
According to three P&I insurance sources, some but not all of the P&I clubs’ policy types are affected by the removal of coverage for Ukraine and Russia.
“This is being driven by reinsurance,” said Stephen Rebair, deputy global director, underwriting at North, adding that reinsurers were limiting their exposure to the region and “those exclusions have to be passed down the line”.
According to industry sources, the exclusions will make it more difficult for charterers to find insurance, raise prices, and could result in some ships sailing without insurance.
Global players Hannover Re, Munich Re, and Swiss Re as well as syndicates in the Lloyd’s of London market are among the reinsurance and retrocession providers. All of the businesses declined to comment.
In a proposed contract clause that reinsurers were circulating earlier this month, war-related claims for both planes and ships in Ukraine, Russia, and Belarus were to be excluded, according to Reuters.
According to a senior official at the industry ministry this week, the Japanese government has urged insurers to assume additional risks in order to keep providing marine war insurance for LNG shippers in Russian waters.
(Adapted from Reuters.com)