Vessel insurance in focus after US strikes on Venezuela
The waters surrounding Venezuela see significant maritime traffic. However, following US air strikes on the country on Friday, an insurance body has advised shipowners to consult with underwriters before sailing.
Venezuela is home to the largest proven oil reserves on earth, resulting in busy trade via its waters. Puerto Cabello is the country’s busiest port, handling around 2,400 vessels annually.
Following the US launching air strikes on Caracas and capturing President Nicolas Maduro and his wife, ships may become stranded in Venezuelan waters due to the blockade by the US.
The market has a notification mechanism so that ships bound for specific areas, like Venezuela, must inform their insurers before setting sail or entering.
Neil Roberts, head of marine and aviation at Lloyd’s Market Association (LMA), explained, “Venezuela and its offshore installations are already listed by the Joint War Committee, which means that underwriters are being notified of individual voyages and can assess them individually.”
The London Market’s Joint War Committee publishes a list of areas of perceived enhanced risk in relation to hull war, strikes, terrorism, and related perils, to which Venezuela was added back in 2009 due to escalating threats at the time.
Insurers can query vessels based on trip specifics and decide whether to impose additional security or premiums.
However, most countries on this list have 12 nautical miles of territorial waters and coastal installations. But Venezuela is unique in that its oil installations in the exclusive economic zone (EEZ) are not typically included within the 12 nautical miles of territorial waters.
“To that extent, it is business as before, with insurers having the flexibility to make provision in a highly unusual situation. The offer of cover is there at terms to be agreed,” Roberts added.
Once the insurer issues a quote, it remains valid for 48 hours, and if accepted, cover is in place for 7 days. If a loss happens during the event due to another strike by the US army, the vessel will be covered.
Roberts added: “The details of this intervention are unique and cannot readily be extrapolated onto other areas, but as events develop, so things will clarify. There remain a lot of variables, but the kinetic risk would appear to be limited.”
War insurance is an unusual product, as insurers can intervene mid-policy.
Banks play a key role because they often own mortgaged vessels and require those assets to be protected by insurers, particularly with war insurance.
The London insurance marketplace is the largest supplier of war insurance, writing between 70 per cent and 80 per cent of the world’s war business.