Reinsurers have introduced an exclusion clause on Russia and Ukraine business at the 1 January renewals forcing protection and indemnity insurers to limit their fixed premium war risk cover.
The fixed premium business of P&I clubs — which mainly involves charterers liability cover and small specialist ships — is heavily reinsured in the London market.
TradeWinds earlier reported how reinsurers are under pressure to recover losses from Hurricane Ian and the Ukraine conflict.
With no end to the war in prospect, they have been considering applying an exclusion clause on Russian business to limit further claims.
P&I clubs appear to have been caught by surprise by the move from their reinsurers. A note from the London P&I Club to members said it had been informed “at short notice,” of the change in reinsurance conditions.
Details differ from club to club but generally on 23 December most clubs gave clients seven days’ notice of cancellation on current fixed premium war risk business.
The policies will be reinstated it from 1 January with new exclusions which reflect the conditions applied at the reinsurance renewals.
Exclude all loss
The application of the new conditions vary from club to club but generally they “exclude all loss, damage, liability, cost or expense caused by or arising from or in connection with any Russia-Ukraine conflict and/or any expansion of such conflict; or in any area or territory or territorial waters where Russian armed forces, Russian-backed forces, and/or Russian authorities, are engaged in conflict within the territories (including territorial waters) of the Russian Federation, Belarus, Ukraine and any disputed regions of Ukraine, the Crimean Peninsula and the Republic of Moldova.”
The changes do not affect mutual P&I, war and freight defence and demurrage cover, and the excess war risks cover invovling to shipowners with mutual P&I cover.
More than 90% of P&I cover is provided on a mutual basis from the International Group's 13 member clubs.
Standard mutual shipowners’ protection and indemnity cover is reinsured through the International Group of P&I Clubs claims pool and a general excess of loss reinsurance policy which appears to have so far been unaffected. Reinsurers cover International Group P&I clubs claims in excess of $100m.
A large portion of the excess of loss policy renews this January and the new conditions have not yet been announced.
