The Lloyd’s insurance market will continue to cover Ukraine grain corridor shipments, for now, Lloyd’s chairman Bruce Carnegie-Brown said on Thursday March 23rd.
The deal guaranteeing safe exports of grain and fertilizer from three of Ukraine’s Black Sea ports has been renewed for at least 60 days, with Ukraine stating that the renewal was for another 120 days, but Russia saying that it would be reviewing the situation after 60 days.
War cover policies are subject to a seven-day notice. Carnegie-Brown said that there was “clearly underlying risk that if events change and somebody wanted to sink a ship to make a point, that clearly our appetite for continuing with those kind of risks might change”.
The announcement by Russia that it would be reviewing the situation after just a couple of months has generated difficulties over forward shipments beyond the 60-day period.
The US has denied Russia’s assertion that Western sanctions should be eased before Russia would allow Ukrainian Black Sea grain exports beyond the 60-day deadline. The US claims that there are no restrictions on Russian agricultural products or fertilizer. Russia says that this is disingenuous, as the restrictions on insurance and finance serve to make the export of the theoretically permitted fertilizer products virtually impossible.
Carnegie-Brown said that 60 days was not more than a minor problem, although he accepted that “anything less than 30 days’ notice of the extension becomes a bit problematic”.
Carnegie-Brown was speaking to Reuters after the publication of the Lloyd’s 2022 results on Thursday.
Another issue of interest is the significant number of commercial ships still stuck in Ukraine with the number ranging from an estimated 45 (IUMI) to 60. The estimated insurance cost on the hull side has settled at around $400m, with some estimates as low as $200m and others as high as $500m. While the nature and implications of Constructive Total Loss (CTL) continue to be matters for debate, a general rule is that after 12 months a CTL can be declared by the owners. How that then plays out in negotiations with insurers (e.g., what will happen to the ship and what will happen to the cargo?) will further impact the liability.
Carnegie-Brown said that, whatever the number, it would begin to crystallize over the coming months.
IMO Secretary-General Kitack Lim said separately on Thursday that he would “continue to actively pursue all avenues to develop, negotiate and facilitate the safe departure of vessels not covered by the Black Sea grain initiative”.