Oil and grain shipments in the Black Sea are at risk as reinsurance companies plan to pull out cover

Some of the biggest names in marine reinsurance are just days away from stopping covering key war-related risks for ships bound for Russia and Ukraine, a potential source of alarm for shipping companies that transport everything from oil to grain.

Annover Re and Munich Re are among the reinsurers that have warned that they will stop underwriting risks – even indirect ones – in connection with the Ukraine conflict from the beginning of next year, according to people familiar with the matter.

“The major German reinsurers and others are trying to rule out losses resulting from or related to the war in Russia and Ukraine,” said Chris McGill, cargo class insurer at insurance company Ascot Group, declining to name specific companies. “This is the first time we have ever had to consider a material change to our reinsurance program.”

The reinsurers’ potential withdrawal comes after many have seen their results set back by the war. According to its own statements, Hannover Re created a reserve of 331 million euros in the first nine months of this year for possible damage in connection with the conflict.

If no solution is found, some owners and their primary insurers may have to assume a larger share of the risk for ships sailing to the two countries. It remains unclear at this point whether Hannover Re, Munich Re or others can give way, or how much appetite there is from others to fill the gap.

War risk coverage covers many things including bombs, torpedoes, terrorism, foreign attacks and ship seizure.

Representatives of Hannover Re and Munich Re declined to comment.

Other reinsurers are believed to be taking a similar approach to the two companies.

The fewer reinsurers cover, the greater the burden on insurers. Some will likely have to reduce supply – which will force shipowners to rush to try to find alternatives, or even operate with less coverage.

“We need to reduce the limits that we set,” McGill said. “That will force interest rates to rise as you get an automatic reduction in supply.”

Higher premiums and lack of coverage threaten to complicate the export of key commodities, potentially fueling supply chain chaos and global inflationary pressures if shipments falter.

Although sanctions against Russia are not considered a direct motive for the reinsurers’ step, they do make it more difficult to deal with the country’s raw materials.

https://www.independent.ie/business/world/black-sea-oil-and-grain-shipping-at-risk-as-reinsurance-firms-plan-to-pull-cover-42223092.html Oil and grain shipments in the Black Sea are at risk as reinsurance companies plan to pull out cover

Fry Electronics Team

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