Ship sail

Ship insurers navigate uncharted waters with Ukrainian grain risks after deal struck

LONDON, July 22 (Reuters) – A number of insurers are keen to cover grain shipments from Ukraine after a deal was struck to reopen Black Sea ports, although the first shipments are expected to be in weeks, industry sources said. Friday.

Russia and Ukraine signed a historic agreement on Friday to reopen ports to grain exports, raising hopes that an international food crisis aggravated by the Russian invasion can be alleviated. The deal capped two months of talks brokered by the United Nations and Turkey, a NATO member that has good relations with Russia and Ukraine and controls the strait leading to the Black Sea. Read more

Securing shipping and insurance will be a crucial part of the process going forward.

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“There are a number of underwriters who have expressed an interest in writing this risk and one or two brokers as well. There may well be a consortium formed,” Neil Roberts, head of marine and Aviation at Lloyd’s Market Association. .

“A number of things still need to be resolved and underwriters will need to assess trips individually,” said Roberts, whose association represents the interests of all underwriting businesses in the Lloyd’s of London insurance market.

Ukrainian ports have been closed since the Russian invasion in February, which Moscow calls a “special military operation”, and not enough is known about the state of the ports as well as risks such as floating mines and ships damaged in port areas.

“Shipowners will need some form of financial assurance. So at least the first voyages must prove that the routes are safe,” a shipping industry official said.

The initial problem is that there are more than 80 ships stranded in Ukraine, many with cargo on board, including grain, which must leave before new ships can enter, sources said.

The LMA’s Roberts said the details underwriters needed included “which vessels can be reactivated among those currently docked (in Ukrainian ports)”.

“We’re planning some sort of test to reassure commercial interests. We don’t expect ships to start going out for at least two weeks,” Roberts said.

“Then there’s the issue of chartering and who arranges what. It will take a bit of time to get those contracts in place.”

The LMA has placed Ukrainian waters in their high-risk zone and any crossings must get approval from insurers, who are awaiting further details on the details of how the deal will work.

“The will is there for this humanitarian initiative, but underwriters cannot give any idea of ​​the type of coverage or the prices until they know more,” said an insurance source familiar with the matter. “It’s how quickly this can move from the diplomatic table to a plan that actually evolves.”

A blockade of Ukrainian ports by Russia’s Black Sea Fleet, trapping tens of millions of tons of grain in silos and blocking numerous ships, has aggravated bottlenecks in the global supply chain and, along with sweeping Western sanctions, has fueled runaway inflation in food and energy prices around the world. world.

James O’Brien, head of the US State Department’s Office of Sanctions Coordination, said their goal was “to see the deal fully implemented”.

“Based on our conversations with insurers, if there is full implementation of this arrangement, we believe insurance and vessels will be available,” O’Brien told reporters on Friday.

Guy Platten, general secretary of the International Chamber of Shipping, a global trade group, said he was ready to work with all parties.

“Ensuring crew safety will be crucial if we are to move this deal forward quickly,” Platten said. “Questions remain about how ships will navigate heavily mined waters and how we can effectively equip ships in the region to meet the suggested timeframe.”

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Reporting by Jonathan Saul; edited by Diane Craft and Leslie Adler

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