The ongoing conflict between Russia and Ukraine has presented a slew of significant challenges for the insurance market in the Black Sea. The heightened risk of attacks has made it virtually impossible to insure ships departing from Ukraine through the Black Sea, particularly those laden with grain.
In theory, cargo insurance can be considered on a “case-by-case” basis, as stated by Mathieu Berrurier, the CEO of insurance broker Eyssautier-Verlingue. However, due to soaring premiums, which have surged five to tenfold compared to pre-Russian invasion levels in February 2022, many companies can no longer afford such costs.
Before the Russian invasion, Ukraine enjoyed stable exports of its grain through the Black Sea, courtesy of an agreement with Russia. This allowed Ukraine to export 33 million tonnes of grain and contributed to a reduction in global food prices. Nevertheless, Russia subsequently abandoned this accord and intensified its attacks on Ukrainian maritime infrastructure.
According to insurance brokers, the risks to cargo have significantly broadened, shifting from a focus on attacks on warships to a more pervasive risk for all transiting goods. The majority of Ukrainian grain exports now follow alternative routes, primarily through the Danube River and by rail. However, even ports along this alternative route are under Russian attack.
In an effort to facilitate insurance coverage for vessels transiting Black Sea ports, discussions are underway involving international insurers. The objective is to establish a letter of credit that acknowledges Ukraine and some of its creditors as parties to an agreement. This process is expected to conclude within the next few weeks, according to industry experts.
Meanwhile, the United Kingdom has announced measures to support commercial shipping in the Black Sea transporting grain from Ukraine and to deter Russian attacks on cargo vessels. The British government has also condemned Russian attacks on Ukrainian ports, which have caused severe damage to port infrastructure and significantly reduced Ukraine’s export capacity.
The current situation has prompted Ukraine to explore alternative routes through neighboring countries such as Romania and Croatia for its grain exports, as Russia has shown no inclination to reinstate the Black Sea grain agreements.
Furthermore, it has come to light that a recent missile attack by Russian forces against Ukraine was targeted at a cargo vessel. According to British sources, the intended target was a Liberian-flagged cargo ship berthed in Odessa. This marks the first known instance of a direct Russian attack on a commercial vessel in the area since the United Nations’ Black Sea Grain Initiative (BSGI) was suspended on July 17th. Both Russia and Ukraine have threatened each other’s shipping since then, but actual violence against vessels has remained relatively limited.
In conclusion, the ongoing conflict in the Black Sea has presented a series of challenges for the insurance market and maritime transport in the region, with hopes of evolving solutions to address these challenges and restore stability to the sector.
