Members of the International Group of P&I Clubs are cutting their business relationship with sanctioned Russian shipping giant Sovcomflot (SCF Group).
TradeWinds reported last month that several clubs have already started the process of withdrawing cover from the company.
The protection and indemnity mutuals have been keeping their business relationship with Sovcomflot a closely guarded secret since Russia’s hostilities with Ukraine broke out.
TradeWinds is told that all the members of the International Group will now pull cover in response to global sanctions.
The main clubs that provide insurance cover to Sovcomflot vessels are Skuld, Gard, the North P&I Club, the UK P&I Club and the West of England.
Although the clubs have long-standing business ties with Sovcomflot, the relationship was no longer tenable once the company was named by the UK as a sanctioned outfit.
Banking sanctions against Russia also made it almost impossible for the clubs to pay out on claims in the event of a crew or casualty claim.
Pressure was mounting on P&I clubs to act. The Ukraine government had earlier written directly to the International Group asking it to withdraw cover from Russian shipping companies.
Lower limits
Sovcomflot will be able to find P&I cover from the Russian insurance market, however it will likely be at lower limits than those available through the International Group — and not as widely recognised.
Russian insurers will also be unable to reinsure the risk in the international reinsurance markets because of the growing sanctions network against the country.
Last week, a UK Parliamentary Committee held a meeting on the potential effectiveness of widening insurance sanctions against Russia.
Marine insurance was a key focus of the discussion, with UK members of parliament raising questions about how P&I cover affects the ability of ships to trade around the world.
The P&I insurers follow classification societies, which have been reducing their links with Russia.
Lloyd’s Register, ABS, DNV and, most recently, Bureau Veritas have announced that they are winding down their business relationship with Russian companies and not accepting any new business.
The moves leave Sovcomflot ships without the classification certification and P&I cover required by international maritime conventions to trade around the world.
Asset freeze
Last month, Sovcomflot closed its office in London to comply with sanctions imposed on the company by the UK government.
The UK arm of the Russian shipowner had undertaken all the commercial management and chartering for the SCF Group, with a particular focus on the international account.
Under the UK sanctions, all Sovcomflot companies and assets in the UK are subject to an asset freeze. Releasing funds from them is the subject of licences that need to be approved by the government to ensure there are no benefits to the parent company.
Sovcomflot has about 140 vessels, of which 80 to 90 are operating on daily commercial management. The rest are on long-term time charters or on spot business.
