Ukraine and UK Brokers Extend Affordable War Risk Insurance to All Cargoes
Ukraine has won an agreement with the major insurance brokerage networks in the UK to expand the current war risk insurance program to cover ships carrying all non-military cargo. Previously the program was limited to grain and foodstuffs but will now permit Ukraine to resume exports of other key materials such as iron ore and steel, which are also critical to the country’s economy.
The program is being led by Marsh McLennan working with Lloyd’s and the government of Ukraine. They said the goal of the public-private partnership with the Ukrainian government is to support Ukraine's export trade by providing lower war risk premiums. It will be the first time since the start of the war two years ago that affordable coverage will be available for containerized shipping as well as other forms of breakbulk beyond gain.
“Expanding insurance to cover ships carrying all non-military cargo is extremely important for Ukraine, especially in terms of exporting metallurgical products,” said Yulia Svyrydenko, First Deputy Prime Minister of Ukraine and Minister of Economy. "Insuring vessels backs our efforts to increase the volume of all non-raw material product exports, in particular iron ore and steel. Strengthening the processing industry and developing non-raw material exports are priorities for the government to enhance our country’s economic resilience.”
The minister notes that last year steel production was down by more than three times 2021 levels. Exports of metallurgical products have also decreased significantly from the levels before the Russian invasion. By comparison, Oleksandr Kubrakov, Deputy Minister for Restoration reported that Ukraine exported a record eight million tons of grain in February in large part due to the availability of insurance. He said that currently, more than 90 percent of all agricultural exports go through the ports of Odesa and the Danube, and since the launch of the Ukrainian Corridor, 42 countries have received almost 28 million tonnes of cargo, of which 19 million tonnes are grain products.
The insurance program established by Marsh, Lloyd’s, and Ascot, launched in November 2023 to provide affordable war risk insurance for grain shipments and other critical food supplies globally by offering hull and separate protection & indemnity (P&I) war risk insurance at significantly reduced premiums compared to standard market pricing. Standby letters of credit created by the state-owned Ukrainian banks Ukreximbank and Ukrgasbank, each confirmed by DZ Bank, provide a first loss compensation fund to shipowners and charterers which is supported by the Government of Ukraine.
Underwritten by insurers based at Lloyd’s and other London-based insurers, and led by Ascot, the program provides up to $50 million in hull and P&I war risk insurance. It is available to clients of all Lloyd’s registered brokers, and now will provide coverage for Ukraine’s other leading export industries including iron ore, steel, electrical equipment, and animal fodder.
“We’re pleased to expand this public-private partnership with the Ukrainian government. It will provide exporters with lower premiums to ship a wider range of goods through its Black Sea trade routes and deliver major economic benefits to Ukraine,” said John Doyle, President and Chief Executive Officer, Marsh McLennan.
The move comes as President Volodymyr Zelensky warned in a CNN interview that the maritime corridor might be at risk if U.S. aid is not restored soon. He said maintaining the corridor requires resources ranging from ammunition to air defenses, which are growing increasingly limited without the continuation of U.S. support.