Ukraine nears deal with global insurers to cover grain ships
Ukraine is finalising a scheme with global insurers to cover grain ships travelling to and from its Black Sea ports, a vital step in the country’s attempts to create a safe corridor for exports after Russia withdrew from a UN-brokered deal last month.
Oleksandr Gryban, Ukraine’s deputy economy minister, told the Financial Times that the deal was “currently being pursued and actively discussed” between the relevant ministries, as well as local banks and international insurance groups including Lloyd’s of London.
The scheme could be put in place as early as next month, and could see as many as five to 30 ships covered to travel through what he described as the “danger spot” of Ukrainian waters.
“It depends on how the structure goes and what the level of risk-sharing is going to be between the government and private insurance companies,” said Gryban.
The container ship Joseph Schulte transits the Bosphorus in Istanbul. It is the first vessel to leave Ukraine’s ports since Russia threatened to attack civilian shipping in the Black Sea last month © Yasin Akgul/AFP/Getty Images
Under the cover of Ukrainian onshore defence systems, a German/Chinese-owned cargo ship last week made the first commercial journey out of Odesa since July, when Russia warned it would consider any civilian vessel leaving Ukraine’s ports as military targets. Ukrainian officials believe their missiles can protect a corridor within 100 nautical miles of its coast.
But given the military risks, affordable insurance would be essential to reviving commercial shipping activity at any significant scale. Kyiv is being advised by professional services group Marsh McLennan, which includes consultancy Oliver Wyman and the world’s biggest insurance broker Marsh, on a pro bono basis.
Marcus Baker, global head of marine, cargo and logistics at Marsh, said that “a public-private partnership, with insurers working in tandem with the Ukrainian government, will give greater confidence to shipowners to return to delivering Ukrainian grain around the world to those countries that need it most”.
The details are still to be finalised, but people involved in the discussions said scheme would look to cover vessels going into and out of Ukraine’s ports against damage, and the risk could be shared between insurers and a local state-owned bank.
One said that the bank could provide a letter of credit as collateral. Gryban said the public portion of the risk would likely be backed by the country’s state road fund, which was created to repair Ukrainian roads and is funded by a tax on fuel sales.
The set-up would replace a scheme that was announced a year ago, which provided war and cargo coverage for grain supplies being shipped out of Ukraine. This deal in effect expired when the treaty agreed between Russia and Ukraine broke down.
Insurance cover is vital to the global shipping industry but insuring Ukraine’s grain exports has been made vastly more risky since Russia exited the UN-brokered deal and threatened commercial vessels.
Insurers, who have been stuck with billions of dollars of losses from the war, have pushed for some form of risk-sharing as a condition of taking more exposure to the conflict area.
Lloyd’s said agreements to enable continued exports of agricultural products from Ukraine were “crucial in addressing risks to global food security” and that it continued to work to facilitate grain shipments.
This story originally appeared on: Financial Times - Author:Ian Smith
