A UK Government committee has been told that a ban on Russia accessing London’s marine insurance market may prove ineffective.
Lloyd’s Market Association head of aviation and marine Neil Roberts cautioned a meeting of Parliament’s Treasury Committee meeting that such sanctions may not be successful while the G20 governments remain split on their policy on Russian energy exports.
Roberts comments came as the UK considers whether to extend a ban on Russia accessing aviation and space cover in the London insurance market should be extended to the marine sector.
UK Members of Parliament said AIS data showed tankers are not self-sanctioning in the Russian energy trades. The Treasury Committee asked Robert directly: “Do you think sanctions on marine insurance is a possible option for the UK government, do you think we should do it?”
In response Roberts said he would not like to comment directly on government policy. But he cited sanctions on Italy in 1935 when there was insufficient support because of confusion over whether it applied to the oil industry.
“And now we do not have all of the G20 supporting the sanctions at this time," Roberts said.
"We do not have an agreement on whether there should be sanctions on oil and or gas, because some EU partners are exceptionally dependent on those commodities, and we would not like to destabilise them. On the other hand you are up against an aggressor state that is not deterred by having their credit cards removed,” he added.
Roberts agreed with MPs that the potential impact on the Russian energy export market was a reason sanctions had not been applied to marine insurance.
He also pointed that the impact of sanctions could be limited. He said that the London market only accounts for around 20% of the marine hull insurance market, although it accounts for around 80% of the war risk market. The International Group of P&I Clubs accounts for around 95% of protection and indemnity cover.
Elina Ribukova, deputy chief economist at the Institute of International Finance, had told the same Treasury Committee meeting that income from the energy sector was still contributing between 35% and 50% of Russia’s federal budget reserves.
She said that sanctions on sectors supporting energy exports — including insurance — would be required to impact Russia’s ability to finance its war on Ukraine.
Ribukova said in many cases the private energy sector had been more active than the public sector, by self-sanctioning on Russian energy.
Roberts told the Treasury Committee that its sanctions on Russia accessing aviation and space insurance in the UK market has already had a “profound” impact on the London insurance market.
He urged for improved clarity on the wording of sanctions which he said are causing confusion in the insurance market.
“The complexity of it has been difficult for people to manage. Even very well-resourced compliance teams have found it troublesome. Insurers are not as well-resourced as banks and they are also finding it difficult,” Roberts said.
He was asked whether the UK Government had consulted with the right people before progressing with the aviation and space sanctions.
“There was considerable engagement at a higher level, I think it was possibly not perfect, in that the Treasury talked to people that were highly placed, rather than the experts that were needed,” Roberts said.