In Gallagher’s Q4 update on the H&M and War Risks market, the broker said that the war in Ukraine continued to: warning dominate the War Risks market. The good news was that, since the initial opening of the grain transit corridor in late July 2022, numerous vessels that previously had been blocked in Ukraine ports had managed to sail out, reducing the total loss exposure for the market.
That being said, there were still several vessels blocked in ports which remained closed, some of which have already triggered total losses under their war coverage.
Seven-day premiums for vessels calling to Ukraine or Russia Black Sea ports remained extremely high, while, in addition to this, calls to any ports in Russia remained subject to the continually changing sanctions regimes of the major Western powers.
Furthermore, there was ongoing uncertainty around the operation of the grain corridor where Russia has already once temporarily suspended support.
As well as the obvious risk of physical damage to vessels, underwriters were most anxious about the risk of detainment. The unpredictability of how Russia would act in certain scenarios meant that there was a constant threat of detentions or confiscations of vessels in Russian controlled waters, or Russia closing the grain corridor and once again blocking
vessels in Ukraine from leaving. This potentially gave Underwriters a sizable aggregate exposure if a quantity of vessels were blocked or detained simultaneously.
There were concerns around the availability of reinsurance for /Ukraine trade following treaty renewals at 1/1. As such there was significant uncertainty around the future likely costs for vessels wishing to call there.
As an additional note, industry bodies made the decision to remove the Indian Ocean High Risk Area (HRA) following a decade of effective threat reducing counter-piracy operations. It remained to be seen whether the Joint War Committee also removes the area from their own list of excluded areas for War Risks insurance, but historically they have usually followed suit.
Due to the sizable losses across the market, which are not necessarily marine related, there are some who are predicting fairly seismic changes to the war market in 2023 due to substantial changes in war reinsurance programmes. Given the historical strong performance of the marine war portfolio, Gallagher said that it was hopeful that this scenario would not materialize in such a substantial manner.
