Insurers will cancel war risk insurance in Russia, Ukraine and Belarus from 2023, Reuters reports.
It is about insurers from the United States, Britain and the EU, whose services are used by 90% of ships of the world’s oceans. They include Hannover Re, Munich, Swiss Re and Lloyd’s of London.
Usually the contracts are for one year. But this time the P&I (protection and indemnity) associations of insurers have informed clients that there is no possibility of renewal from 1 January.
The official reason is that the risks are too high.
In practice, such a move may be less PR than the ‘price ceiling’, but more effective in putting pressure on the RF oil trade.
Ships usually have P&I insurance, which covers liability claims to third parties, including environmental damage and crew injuries. In its absence, insurance would have to be different.
What is the problem here?
Cargo, e.g. Ukrainian grain, the loss of which promises relatively small costs, can be insured by the shipping company. But the cost of, say, a Russian oil spill in the event of damage to an oil tanker would be in the billions of dollars – and that requires resources on an entirely different scale.
Russia could, of course, create a state-owned insurer – on its own or in partnership with someone like Turkey. But there is a nuance.
At the moment risks of Russian oil transportation by tankers are on the shoulders of western insurers. And if anything happens to a tanker, a Western company will pay.
And from the 1st of January 2023, if something happens to a Russian oil tanker, it will be a profitable business for Russia’s enemies in the West, relieving them of all responsibility.
Can one rule out the start of sabotage against tankers carrying Russian oil from the new year? Let us recall the Nord Streams and Kiev’s announced plan to create a “horde of drones” – including naval drones.
This is a new challenge that needs to be responded to. And, preferably, in time.
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