Marine

In this chapter of our Annual Insurance Review 2023, we look at the main developments in 2022 and expected issues in 2023 for Marine.

Key developments in 2022 

2022 has been a waiting game for many of the world's marine insurers and will continue to be so in 2023. 24 February 2023 has a very large red circle around it on most marine underwriter's calendars. 

The Russian invasion of Ukraine in the early hours of 24 February 2022 led to the closure of all Ukrainian sea ports – stranding a significant number of ships, seafarers and cargoes. The International Maritime Organisation reported that at the end of July 2022, 84 merchant vessels and 450 seafarers remained stranded in Ukrainian ports.   

On 22 July 2022 the Istanbul Agreement established a safe maritime corridor to allow movement of foodstuff cargoes (and vessels) in and out of three Ukrainian ports - Odesa, Chornomorsk and Yuzhny. That Agreement (recently extended to mid-March 2023) permitted the safe departure of some stranded vessels and cargoes. But the Agreement's vessel inspection process is slow and there are significant delays. It is fair to say that the Agreement's priority has been to get "fresh" cargoes out from Ukrainian grain silos. Vessels already laden with their cargoes at the outbreak of the invasion are not exactly near the head of the queue. Vessels carrying non-foodstuffs remain (for now) outside of the Agreement altogether. 

Ukrainian advances in the south-east and the liberation of Kherson in November 2022 led to renewed hope that ports in the Mykolaiv region might be included in the Agreement. However, continued Russian occupation of the Kinburn spit – a small peninsula 5km from the Ukraine mainland – means vessels and cargoes going in and out of Mykolaiv ports would remain within range of Russian artillery, preventing any safe passage. 

Marine products are pretty good at dealing with this scenario. In general, marine war risks insurance pays out when vessels and their cargoes are restrained or detained for a particular period of time. The war risks cover on your merchant vessel or cargo is likely to include a blocking & trapping clause in some form, which can pay out if your vessel or cargo is stuck in a closed or blocked port for an agreed period. The only question is how long you have to wait. Some clauses provide for six months, others for 12. If the vessel or cargo gets out on day 179 or day 364 there is no claim under the clause. But if the vessel or cargo is still stuck there on day 180 or 365, the clause can pay out an immediate total loss.  

And so the marine insurance market waited. For those on 180 day covers, that milestone passed from late August 2022 onwards and with it, some very significant and immediate total losses. But as we reach the first anniversary of the Russian invasion on 24 February 2023, and of the closure of Ukrainian ports, those vessels and cargoes that remain stranded in Ukraine in 2023 are likely to trigger further total losses.

When you think of the impact that events in Ukraine have had on the marine insurance market this year, you would forgive it for not wanting to touch anything in the Black Sea ever again. But the world needs Ukrainian foodstuffs – and to get the grain and edible oils where they are most needed, the vessels and cargoes still have to carry insurance. Due credit must be given to the marine insurance community for engaging with international bodies to insure these essential transits, and for coming up with innovative products to plug the insurance gap created by the Russian invasion,  which allowed vessels to go into the permitted Ukrainian ports, load their cargoes and deliver them safely out to the world. As of 21 December 2022, the United Nations Joint Coordination Centre that facilitates the Agreement reports that there have been 643 outbound voyages from Ukraine carrying grain and edible oils – over half of which were declared for delivery to developing countries.

What to look out for in 2023

In 2023 please spare a thought for seafarers in Ukraine, looking after stranded vessels and cargoes, and for the shipping staff and port workers who continue to facilitate safe passage of vessels and cargoes out of Ukraine, all amidst on-going hostilities. As we hope for further positive developments. 2022 taught us that, even in the most difficult circumstances, constructive dialogue and engagement can lead to practical and positive outcomes.

Written by Iain Anderson.

Download our full Annual Insurance Review 2023 for more insights.