The London insurance sector is preparing to cover Ukrainian grains and fertiliser shipments through a secure corridor, voyages that may need up to $50 million of insurance cover per cargo, industry sources involved said on Wednesday.
London’s marine insurance market has placed the Black Sea region on its high-risk list and insurance costs have soared.
For each voyage, every ship will need separate layers of cover including for the cargo and for the ship itself, known as hull and machinery cover. An additional premium is also charged by underwriters for entering such areas.
Lloyd’s insurer Ascot and broker Marsh have launched a facility for grain traders to provide up to $50 million in cargo cover for every voyage, Marsh’s global head of marine and cargo Marcus Baker said.
“We have had some enquiries in the last couple of days and we fully expect that to gain traction,” he said, adding $50 million was more than enough for most grain shipments.
While there were issues to be resolved related to the corridor and the ports, he said: “The fact we have this in place means when it does happen, we can get moving.”
Baker declined to comment on pricing but said the facility would include a “no claims bonus” – a refund for a voyage without mishap.
He also said other insurers could join Ascot in providing the cover.
The first grain ship to leave a Ukrainian port since Russia invaded on Feb. 24, following a deal brokered by Ankara and the United Nations, was set to pass through the Bosphorus after inspection ended on Wednesday.
It is unclear what cover the first high-profile shipment had, but the industry officials said insurance would be essential for all voyages.
A Turkish official said the number of deliveries from Ukraine may pick up after the successful first trip.
Turkish, Russian and Ukrainian military officials, working with a U.N. team, have set up a Joint Coordination Centre (JCC) in Istanbul to enable shipments from Odesa, Chornomorsk and Yuzhny – three Black Sea Ukrainian ports.
Neil Roberts, head of marine and aviation at the Lloyd’s Market Association, which represents all the underwriting business in the Lloyd’s of London insurance market, said further risk details were needed for those looking to write the transits.
“The market awaits approval of inbound voyages by JCC Istanbul,” Roberts said.
Other insurance solutions are also being worked on.
Hiscox (HSX.L) is committed to a planned insurance consortium providing hull and cargo cover for ships travelling through a safe passage from Ukraine, its chief executive said on Wednesday.
Initial costs for the additional premium to cover ships for any attack were being worked out at around 3% of the value of a ship for a 7-day period, one insurance source said.
That compares with up to 1.5% for the wider Black Sea waters, which would still be hundreds of thousands of dollars in costs for a seven-day voyage.