Image used for representative purpose. AP
Ship insurers have announced the cancellation of war risk coverage across Russia, Ukraine and Belarus from January. The move comes after an exit of reinsurers from the region as they faced heavy losses due to the ongoing war.
Reinsurers – who insure the insurers – usually renew their 12-month contracts with clients on 1 January.
As many as 12 out of 13 Protection and Indemnity (P&I) clubs from US and UK said they would pull back operations and will no longer be able to offer risk coverages for some liabilities to clients. These clubs are among the world’s biggest P&I insurers and cover around 90 per cent of the world’s ocean-going ships.
On December 23, the UK-based P&I club said that the cancellations arose due to a lack of availability of reinsurance for reinsurers which is also known as retrocession, according to a report by Reuters.
The firm said in a statement, “The Club’s reinsurers are no longer able to secure reinsurance for war risk exposure to Russian, Ukrainian or Belarus territorial risks.”
The American P&I club said that it had received a notice of cancellation from its reinsurer and hence was forced to withdraw its own insurance from the region.
Ships across the world typically are covered with P&I insurance that covers third-party liability claims like environmental damage, property damage, collisions and removal of wrecks.
What will be the impact of the cancellations?
The withdrawal of reinsurances will mean that ship owners or charterers would not be able to secure insurance in the new year which could lead to soaring prices of goods and some shipping firms may even decide to avoid the regions or to sail without insurance.
In September, a London-based reinsurance provider Lloyd’s said that it was bracing for a ? 1.1 billion hit as Russia invaded Ukraine, a region where some of its members had been insuring ships to transport grains from Ukraine’s ports under a UN-brokered deal of July.
According to a recent estimate, the war will cost the global insurance industry an overall cost of ?10bn to ?12bn.
With inputs from agencies
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