"For more than three centuries, the Lloyd’s market has been sharing risk to protect people and businesses, inspiring them to create a braver world."
- John Neal, Lloyd's of London CEO
On the 24th December, UKP&I issued a notice stating that the club’s reinsurers are no longer able to secure reinsurance for war risk exposure to Russian, Ukrainian, or Belarus territorial risks.
This decision by reinsurers to cancel coverage has affected P&I clubs American, North, UK, and West which currently cover 90% of the world’s ocean-going ships, including those from the UK and US. These clubs will have to alter the scope of coverage offered to Members of Charterers Liability and ship owners’ extended and ancillary covers.
Given that most contracts run on a 12-month basis and renew on the 1st January, this is the first chance reinsurers have had the opportunity to cancel coverage for clients since Russia invaded Ukraine in February, reports Reuters.
Reinsurance providers including Hannover Re, Munich Re, and Swiss Re, as well as Lloyd’s of London, whose members also provide reinsurance contracts, reportedly declined to offer comment.
Prior to this announcement, following the signed deal - brokered by Turkey and the United Nations - to reopen grain and fertilizer exports blocked by the war, Lloyd’s of London had said it was ‘preparing to provide cover’ for Ukrainian grain shipments, recruiting insurers such as Lancashire, to underwrite ships passing through the grain corridor.
READ MORE: Lloyd’s of London 'preparing to provide cover' for Ukrainian grain shipments
In August, Marsh, insurance broker and risk advisor, and Ascot Group, global speciality (re)insurer, announced the launch of the new Marine Cargo and War facility. This facility provides up to $50m in all-risks marine cargo and war coverage for Ukrainian grain and other food supplies being shipped through the grain corridor.
Later that month, the facility’s first insurance placement was announced, with insurers associated with the facility agreeing to extend its provisions to clients of Lloyd’s of London registered brokers in hopes of providing ‘added support to ongoing humanitarian efforts.’
Commenting on the decision at the time, David Roe, Marsh head of UK cargo noted that cargo and war insurance will play a “pivotal role” in the broader resumption of grain and other vital food exports from Ukraine’s Black Sea ports.
“By making the facility available to clients of Lloyd’s of London registered brokers, it is our hope that we can all work together to support international efforts,” said Roe, “and help ensure Ukrainian grain reaches the world’s most vulnerable people during this terrible time of conflict.”
READ MORE: Marsh and Ascot Group announces first placement for Ukrainian grain insurance facility
The recent U-turn on war-risk cover for shipping across Russia, Ukraine, and Belarus dampens these efforts to support the Ukrainian economy and could result in some shipping firms either avoiding the region or sailing without coverage.
In Japan, the decision prompted government intervention with The Japan Times today reporting that nonlife insurers will now be continuing marine war insurance in waters around Russia and Ukraine early next month but plan to continue negotiations with reinsurers for ships departing later.
