The war risk insurance market has been hit by serious losses related to ships trapped in Ukrainian ports by the war with Russia, says law firm HFW partner Richard Neylon.
Speaking at the International Union of Marine Insurance (IUMI) conference in Edinburgh, Scotland, Neylon said most claims have now been settled, but at considerable cost to war risk underwriters.
He is unsure of the total values carried by the war risk market but, pushed for an answer, said: “If I were to put a figure on it, [it] would be over $500m, perhaps closer to $700m.”
As a guide to the sums involved, Neylon said around 30 total loss claims with values exceeding $400m hit his desk from 24 February 2023 — 12 months since the outbreak of war.
Under war risk policies, shipowners can claim for the total loss of a vessel if it has been detained for more than one year under trapping and blocking clauses.
While most claims have been settled, some are being contested.
Most disputes between underwriters and owners involved ships that were not allowed to leave Ukraine ports under the United Nations’ Black Sea Grain Initiative because they were not carrying grain.
Underwriters have contended that some of these ships could have switched cargoes and sailed out under the scheme.
Neylon cited two Angelicoussis capesize bulk carriers that unloaded a cargo of coal and replaced it with a grain cargo to escape Black Sea ports. TradeWinds earlier reported that the 180,900-dwt Maran Excellence (built 2016) and 179,700-dwt Maran Astronomer (built 2012) escaped the port of Yuzhny by switching to a grain cargo.
Another issue causing underwriters to contest claims is when insured values have exceeded market values.
“I understand the mortgagee wants to protect their position, but when there is a vast disparity between insured value and market value, then there are difficulties,” Neylon said.
Claims have been settled through a variety of methods, including full payout, partial payout with the shipowner keeping control of the vessel and sale to a third party.
Most underwriters, the lawyer said, have been reluctant to take control of the ships they have paid out on.
