Lloyd’s of London’s war underwriters prepare to pay out over ships stuck in Ukrainian waters
Lloyd’s of London’s war underwriters have begun setting aside cash reserves as they prepare to pay out on a flurry of claims from the owners of ships stuck in Ukraine’s territorial waters.
The insurance market is readying itself for a new wave of claims from shipowners that have now become viable following the anniversary of Russia’s invasion of Ukraine in February 2022, insurance industry experts told Morning Wire
Lloyd’s has already set aside £1.4bn to pay for claims arising from the war in Ukraine, including those claims related to the more than 400 internationally owned aircraft that were seized by Russia in March 2022.
The London market’s underwriters are, however, also building up significant cash reserves to pay for claims arising from around 80 ships that have been stuck in the Black Sea and the Sea of Azov since Russia’s February invasion.
Tens of ships and hundreds of seafarers, which have been excluded from the UN brokered Black Sea Grain Initiative, have been stuck in Ukrainian waters since the start of the war due to the threat of various perils such as sea mines.
The Black Sea Grain Initiative only covers dry cargo ships from three Ukrainian ports, meaning tens of cargo ships and their crews of at least 300 seafarers remain unprotected.
In its annual report, Lloyds said: “Marine war portfolios are currently holding reserves in the 2022 year of account for potential losses that may materialise as a result of blocking and trapping in the Black Sea arising from the conflict in Ukraine.”
Rob Smart, chief technical officer at London insurance buyer Mactavish, explained Lloyd’s is preparing for a “sudden spike in claims,” as he noted the one-year anniversary of the war marks the point at which many shipowners will be able to declare their ships “unrecoverable”.
The surge in claims is in turn set to see “sharp pricing increases” in the cost of marine insurance policies, as insurers seek to recover war related losses, Lloyd’s said in its annual report.
Lloyd’s also notes that the vast majority (90 per cent) of all losses it expects to incur from the Ukraine war have not yet been reported, meaning any costs remain unclear.
Lloyd’s has already faced a flurry of lawsuits over its refusal to pay out on the billions worth of claims it has received from aircraft leasers that had their planes seized by Moscow in retaliation to the imposition of Western sanctions.
Lloyd’s of London declined to comment, while Lloyd’s Market Association was approached by Morning Wire for comment.