Ukraine War – New Marine Insurance Report Studies Impact Of Russian Aggressions On Shipping
The shipping industry has been affected on multiple fronts by Russia’s invasion of Ukraine, with the loss of life and vessels in the Black Sea, disruption to trade, and the growing burden of sanctions. It also faces challenges to day-to-day operations, with knock-on effects for crew, the cost and availability of bunker fuel, and the potential for growing cyber risk.
The invasion has further ramifications for a global maritime industry already facing shortages. Russian seafarers account for just over 10% of the world’s 1.89 million workforce, while around 4% come from Ukraine. These seafarers may struggle to return home or rejoin ships at the end of contracts. Meanwhile, a prolonged conflict is likely to have deeper consequences, potentially reshaping global trade in energy and other commodities. An expanded ban on Russian oil could contribute to pushing up the cost of bunker fuel and impacting availability, potentially pushing ship owners to use alternative fuels. If such fuels are of substandard quality, this may result in machinery breakdown claims in the future. At the same time, security agencies continue to warn of a heightened prospect of cyber risks for the shipping sector such as GPS jamming, Automatic Identification System (AIS) spoofing and electronic interference.
“The insurance industry is likely to see a number of claims under specialist war policies from vessels damaged or lost to sea mines, rocket attacks and bombings in conflict zones,” explains Justus Heinrich, Global Product Leader, Marine Hull, at AGCS. “Insurers may also receive claims under marine war policies from vessels and cargo blocked or trapped in Ukrainian ports and coastal waters.”
The evolving range of sanctions against Russian interests presents a sizeable challenge. Violating sanctions can result in severe enforcement action, yet compliance can be a considerable burden. It can be difficult to establish the ultimate owner of a vessel, cargo, or counterparty. Sanctions also apply to various parts of the transport supply chain, including banking and insurance, as well as maritime support services, which makes compliance even more complex
Ukraine War Insurance Report Takeaways
- The war has caused widespread disruption to global shipping, and is likely to exacerbate ongoing supply chain disruption, port congestion and crew crises caused by the Covid-19 pandemic.
- As of the beginning of April 2022, numerous merchant vessels were trapped in Ukrainian ports along the Black Sea and the Sea of Azov. For those that remain, the (IMO)  called for the urgent establishment of a blue safe maritime corridor to allow the evacuation of seafarers and ships from the high-risk and affected areas in the Black Sea and the Sea of Azov. However, it is uncertain whether it will be safe for vessels to leave.
- Marine insurance losses from the war in Ukraine are currently limited, although the conflict is likely to create uncertainty and legal questions for affected hull and cargo policies. at risk from sea mines, rocket attacks and the threat of detention.
- The Ukraine invasion had ramifications for the global maritime workforce, which is already facing shortages as it comes out of the pandemic. Over a thousand seafarers from over 20 countries were thought to be stuck on vessels trapped in the Black Sea following the outbreak of the Ukraine invasion.
- The range of sanctions against Russian interests presents a sizable compliance challenge.
You can find the full supplemental report here: Impact of Ukraine war on global shipping
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