Underwriters say it is unlikely they will have to start paying out on total loss claims for some of the 50 or more ships trapped in Ukraine ports.

As TradeWinds reported previously, there are around 50 non-Ukrainian ships over 10,000 dwt caught up in the conflict. They have a total market value of more than $900m.

The Thomas Miller-managed Hellenic War Risks reportedly has one of the highest exposures because of the high number of Greek bulk carriers stranded at Ukrainian ports, with London insurers also heavily on the hook for claims.

Under standard war risk policies, owners can make a total loss claim for “blocking and trapping” if the vessel has been unable to leave the region for six months or more.

Owners could bring claims from 24 August, which will be exactly six months after Russian tanks rolled into Ukraine.

However, underwriters say such claims will only be met if the insured assets have been nationalised by the states involved in the conflict.

Without the vessel being taken over, owners will have to wait 12 months before they can bring a total loss claim for blocking and trapping.

Another factor is that war risk underwriters are already paying out a daily management fee to owners to cover the cost of maintaining the vessels. Most of the ships at Ukrainian ports are managed by local agents and crew.

Such insurance management fees are typically capped at 10% of the hull value.

One broker said: “In the wording of most war risk policies, a claim for blocking and trapping after six months would only be met if the vessel had been nationalised. Underwriters are unlikely to pay out if they are still in control of the vessel and the maintenance costs are being covered.”

War risk policies are reinsured in the London market, where reinsurers are keen to limit their Ukraine-related losses. Reinsurers are already facing billions of dollars in claims linked to Russia’s acquisition of aircraft financed by foreign leasing companies.

Increased value

Another factor that may deter owners from making a total loss claim is that insured values are likely to be substantially lower than current market values.

According to broker Clarksons, the value of a secondhand 10-year-old panamax bulk carrier has increased from $20m at the start of this year just before war broke out to $27m now.

There is also an increasing possibility that owners may be able to safely sail their vessels out of the region after Turkey came to an agreement with Russia on shipping security in the Black Sea for the resumption of Ukrainian grain exports.

The deal is being promoted by the United Nations as the way forward.

“We have seen a critical step, a step forward to ensuring the safe and secure export of Ukrainian food products through the Black Sea,” United Nations secretary general Antonio Guterres told a press conference last week. “In a world darkened by global crises, today at last, we have a ray of hope.”

London-based underwriters have told TradeWinds that they would be prepared to insure ships to take out Ukrainian grain, if such a deal had the backing of the UN.

The UK government has already committed to providing assistance to demine the region and promised that the London insurance market would be ready to step in and insure Ukrainian grain shipments.