Insurers count the cost of ships snagged in Ukraine crisis

Taylor Maritime

24/02/2023 13:40

By Jonathan Saul
       LONDON, Feb 24 (Reuters) - Insurers are facing half a
billion dollars in claims for up to 60 commercial ships still
stuck in Ukraine a year after the start of the war with Russia,
industry sources said.
    When the conflict started, more than 90 merchant ships -
many with food cargoes onboard - and some 2,000 crew members
were caught in Ukraine and unable to leave due to the fighting. 
    Curtailed shipments from major grain exporter Ukraine played
a role in the resulting global food crisis.
    According to shipping and insurance industry assessments,
there are still between 40 and 60 ships stranded, and ship
owners can claim a total loss for vessels stuck for a year from
their insurers.
    With insurers already grappling with exposure to commercial
aircraft caught up in Russia, the prospect of payouts will
likely translate into higher costs for shipments from the
region.
    A senior industry source said exposure for the ships
currently stuck was estimated at $500 million. "While aviation
will be bigger, there are going to be claims," said another.
    London-listed Taylor Maritime Investments is among ship
operators with a vessel and its corn cargo still in Ukraine. The
company has tried to protect its asset through insurance, its
chief executive Edward Buttery said. 
    "We have kept (insurance) cover in place for the duration.
It cost a lot of money, but the ship is worth considerably
more," he told Reuters. "The liabilities for those people who
have ships stuck there, to get those ships out - it’s a real
headache."
    Despite military gains, many of Ukraine's ports are still
impacted by fighting, with floating mines around the Black Sea
area adding to risks.    
    The largest port, Odesa, is part of a U.N.-backed deal
enabling grain to leave three of Ukraine's Black Sea ports,
which has allowed some ships to sail. 
    It has prioritised the exit of dry bulk ships, but an
estimated five vessels, including the Joseph Schulte container
ship, remain stuck there.
    Germany's BSM, which manages the Joseph Schulte, has been
trying to get the vessel out of Odesa for a year so far without
success, a group spokesperson said. 
    Other Ukrainian ports not part of the U.N. arrangement -
including no. 2 grains terminal Mykolaiv, where industry
estimates suggest more than 25 ships are still stuck - remain
blocked. 
    More than 300 mariners are still stranded, and in an open
letter shipping associations called on the U.N. this week to
evacuate the seafarers, saying "simply doing their jobs cannot
come at the expense of their lives".    
    Kitack Lim, Secretary-General of U.N. shipping agency the
International Maritime Organization, said on Friday he was    
pursuing "all avenues ... to allow for the safe departure of the
stranded vessels and seafarers".   
    In the meantime, with the Black Sea already listed as a high
risk zone by the London insurance market, additional war risk
insurance premiums of tens of thousands of dollars a day are
common costs now alongside fuel and freight.
    Since Jan. 1, when policies are renewed, reinsurers that
provide financial protection for insurance companies have added
exclusions for ships and planes for Belarus, Russia and Ukraine.
    Since the introduction of exclusions this year, insurers who
provide cover don't have the cushion of reinsurance against big
claims.
    "There is not much we can do, but wait and try to understand
what is going on," Frederic Denefle, president of marine insurer
association IUMI, said.
    One of the difficulties emerging is if an underwriter pays a
constructive total loss and then takes ownership of the ship in
Ukraine, "which is the last thing they want to do", said Marcus
Baker, global head of marine and cargo with risk advisory and
insurance broker Marsh.
    "It will be interesting to see how the market settles these
claims," he said. "There is going to be some form of
constructive agreement I suspect, but then that owner will have
to buy war risk insurance all over again."
    "If the ship is stuck there for another 12 months, will they
get paid twice? No one has come across this situation in this
level of detail before." 
 (Reporting by Jonathan Saul; Editing by Veronica Brown and Jan
Harvey)
 ((jonathan.saul@thomsonreuters.com; + 44 207 542 4357 ; Reuters
Messaging: jonathan.saul.thomsonreuters.com@reuters.net))