Allianz: Russia Invasion of Ukraine Exposes Insurance Industry to Specialist War Policy Claims fromVessel Damages
Global insurance giant, Allianz in its 2022 safety and shipping report said that Russia invasion of Ukraine has exposed insurance industry to a number of claims under specialist war policies from vessels damaged or lost to sea mines, rocket attacks and bombings in conflict zones.
Allianz Global Product Leader and Marine Hull, Justus Heinrich, in his report at Allianz Global and Corporate Specialty (AGCS), an annual publication of the insurance giant, said insurers may also receive claims under marine war policies from vessels and cargo blocked or trapped in Ukrainian ports and coastal waters.
According to Allianz, “The evolving range of sanctions against Russian interests presents a sizeable challenge. Violating sanctions can result in severe enforcement action, yet compliance can be a considerable burden. It can be difficult to establish the ultimate owner of a vessel, cargo or counterparty. Sanctions also apply to various parts of the transport supply chain, including banking and insurance, as well as maritime support services, which makes compliance even more complex.”
According to the report, Russia’s invasion of Ukraine, with the loss of life and vessels in the Black Sea, disruption to trade, and the growing burden of sanctions as well as challenges to day-to-day operations, with knock-on effects for crew, the cost and availability of bunker fuel, and the potential for growing cyber risk will add to insurance claims.
The report said the invasion has further ramifications for a global maritime industry already facing shortages, adding that Russian seafarers account for just over 10 percent of the world’s 1.89 million workforce, while around 4 percent come from Ukraine.
Comparing losses incurred by businesses between last year and the previous years, the Allianz report said 54 large ships lost worldwide last year showing that total losses was down by 57 percent over past decade. Giving country by country analysis of the losses the Allianz report said South China, Indochina, Indonesia, and the Philippines top loss location.It further said the Arabian Gulf saw a significant increase in loss activity to rank second. while British Isles sees most shipping incidents.
It noted that Southeast Asian waters are replacing the Gulf of Guinea as the most dangerous for commercial shipping.
The report observed that the shipping sector has demonstrated tremendous resilience through stormy seas in recent years, as evidenced by the boom seen in several parts of the industry today.
According to Allianz Global Head of Marine Risk Consulting, captain Rahul Khanna, total losses are at record lows – around 50 to 75 a year over the last four years compared with 200+ annually in the 1990s. He however noted that the tragic situation in Ukraine has caused widespread disruption in the Black Sea and elsewhere, exacerbating ongoing supply chain, port congestion, and crew crisis issues caused by the Covid-19 pandemic.
“At the same time, some of the industry’s responses to the shipping boom, such as changing the use of, or extending the working life of, vessels also raise warning flags. Meanwhile, the increasing number of problems posed by large vessels, such as fires, groundings and complex salvage operations, continue to challenge ship owners and their crews.”