By KYIV. Jan 5 (Interfax-Ukraine) – Termination by the international mutual insurance association International Group of P&I Clubs from January 1, 2023 of reinsurance of war-related risks in the region of Ukraine, the Russian Federation, Belarus and Moldova will not lead to a halt in the export of crops from Ukrainian ports, but will complicate and increase the cost of issuing insurance policies.
This opinion was expressed on Facebook by Maxigrain business development manager, partner of the Trend and hedge club project Olena Neroba.
"In addition to the potential increase in the tariff for third-party liability insurance – P&I (and, as a result, the cost of freight), the list of companies available for the conclusion of policies will be significantly reduced for us. In addition, it is impossible to insure in Ukrainian companies today: due to NBU resolution No. 18 dated February 24, 2022 they cannot pay in foreign currency in favor of foreigners and it makes no sense to conclude policies with them. Therefore, the insurance market will simply narrow for us, but this does not mean a stop to trade," she wrote on the social network.
She recalled that a few weeks ago, information began to circulate that insurance policies for ships going to/from Ukraine would not include military risks from January 1, 2023, which would mean a complete halt of Ukrainian maritime exports in the context of the ongoing military aggression of the Russian Federation.
According to her, when transporting goods by sea, it is necessary to issue three insurance policies: Marine cargo insurance, Hull and Machinery (H&M), hardware insurance in the amount of approximately 1% of the cost of the vessel for transport risks) and Protection and Indemnity (P&I) – liability insurance of the ship owner to third parties for the ship, cargo, crew.
Neroba said that two parallel "markets" deal with P&I policies.
"This is the market of IG mutual insurance companies – ship owners have created something like a "mutual benefit fund." The club consists of 13 large regional ship owners’ clubs. It is they who, from January 1, 2023, decided not to cover the ship owner’s liability risks associated with the war. Other risks are still covered. And the fixed premium market: these are insurers that insure the same risk, but are not bound by IG’s obligations, so they should not accept their rules. Companies that are not members of the Club are still working," the representative of Maxigrain said.
Thus, from January 1, in Ukraine, the Russian Federation, Belarus and Moldova, the IG club will not work for all insured events, while fixed premium will continue to insure, but most likely will raise rates.
Neroba also said that the same insured event can be caused by both military and non-military factors, and insurers will need to prove that certain accidents are caused by military factors.
"If a member of the crew died due to poisoning, the policy of the Club and other companies works, and if a fragment of a martyr falls on it, the policy will not cover the Club, only companies outside the Club. If during the rain the crew did not have time to close the holds and the grain got wet and spoiled – the policy of both the Club and non-club companies is in effect, and if they did not have time due to air raid alerts, the Club’s policy will not cover, only non-club companies," the expert said.
According to her, the most dangerous for grain traders is the risk of flooding a grain carrier due to shelling by the Russians and the corresponding damage to the environment, the Club will not pay for these risks.
"Probably, the Club may change its mind after some time (most likely in a year, because decisions are made annually, because they are dependent on the policy of reinsurers) and return full coverage for a fee so as not to lose business (my personal opinion)," Neroba said on social media.
