Ukraine’s government is in talks with insurers to start a new program to cover ships hauling grain through some of the riskiest parts of the Black Sea.
The service could start as soon as early September, though a precise framework is still being worked out, said Marcus Baker, global head of marine, cargo and logistics at insurance broker Marsh.
The program would help provide cover for vessels carrying Ukraine’s grain out of its ports in the northern Black Sea, which haven’t seen any inbound crop vessels since Russia pulled out of a regional pact to facilitate shipments in July. That’s restricted Ukraine’s exports to lengthier river, road and rail routes in the throes of this year’s harvests — curbing flows abroad.
Ukraine Weighs Using New Black Sea Export Corridor for Grain Shipments
Even with a deal, exports from Ukraine remain risky as Russia has said all ships headed to Ukraine’s ports will be considered potentially carrying military cargo. It’s still not clear who will shoulder any payouts and how claims would be paid.
Attacks by Russian forces on agricultural infrastructure in recent weeks have helped sustain sky-high insurance premiums for ships calling into Ukraine. The government in Kyiv opened a corridor for traffic from the Black Sea this month, but so far has said the zone will be primarily used to free ships stuck since the start of the war in early 2022.
A Ukrainian government official, who declined to be identified, also said the insurance program could be prepared in several weeks.
Current market rates for war risk insurance can be anywhere between 3% and 5% of the value of a ship, meaning there is an economic need for the new facility to help Ukraine export its grain, according to Crispin Ellison, a partner at consultant Oliver Wyman LLC. The plan is for the new initiative to be a private-public partnership, he added.
Marsh and Oliver Wyman are both units of professional services firm Marsh McLennan, which has supported the Ukrainian government in considering options for war-risk insurance, according to the . The new insurance arrangements were first reported by the Financial Times.
Photograph: Multiple bulk carrier cargo ships navigate the Sulina Canal, a river channel between the Danube River and the Black Sea, in Tulcea, Romania, on Sunday, July 23, 2023. The threat of Russian aggression towards Ukraine’s Black Sea ports and ships will force the country to export its enormous quantities of grain by river, road and rail — all of which are fraught with challenges. Photo credit: Andrei Pugnovschi/Bloomberg
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