As EU Embargo Nears, Turkey Checks Insurance for Russian Oil Cargoes
The government of Turkey plans to require tankers heading for the Bosporus to prove that they have insurance before making the transit, reflecting concerns about access to cover for Russian oil cargoes after an EU embargo enters into effect. Uninsured oil shipments passing through the narrow strait could expose Turkey to outsize financial risk from damages and cleanup costs in the event of a marine casualty.
On December 5, the EU and the UK will ban their marine insurers - who hold 95 percent of the world's market - from covering Russian oil cargoes. There is an exception for oil cargoes priced beneath a set price cap, but Russia has pledged not to cooperate with this limit. This will leave tanker operators carrying Russian oil dependent on alternate sources of insurance, including self-funded risk pools - like the $60 million fund set up by Indian national reinsurer GIC Re.
Thanks to steps taken by the Russian government earlier this year, Russian tankers can access their own domestic insurance through a non-IG member insurer, the Ingosstrakh Insurance Company, with reinsurance through the Russian National Reinsurance Company (RNRC).
However, the capacity of these new funds to pay out the nine-figure costs of a major tanker casualty is not certain, and some analysts have cautioned that Russian marine insurers could be swayed by domestic political influence in deciding whether to honor claims.
Whichever insurers they use, tankers are required to carry a "blue card," an IMO-standard certificate proving marine insurance. In addition to this existing proof of cover, Turkey will now require a letter from the insurer declaring that the coverage is valid for the specific voyage through the Bosporus. The new rule takes effect December 1, just in time for the implementation of the EU's embargo.