Coverage is no longer being offered for shipments from the country as Russia quit the UN-backed deal.
A cargo insurance company providing Ukraine grain shipment coverage through a safe sea corridor has now been suspended following Russia’s exit from the agreement backed by the United Nations, according to broker Marsh.
Moscow announced that it was stepping away from the grain deal that was established a year ago.
The grain deal was made between Russia and the United Nations to help reduce the risk of creating hunger around the world by standing in the way of the shipments. Ascot, a Lloyd’s of London insurer, has been leading a marine cargo and war facility with other underwriters. They have been providing up to $50 million in cargo insurance per load.
“It is currently on pause,” said Marsh lead of UK cargo, David Roe. Marsh had been serving as the broker for the facility. “It is suspended effectively due to the agreement not being extended.”
“Without the corridor being in place, there is a greater degree of uncertainty attached to the risk,” said a statement from Ascot.
Cargo insurance has been critical to making sure that shipments could legally travel through the corridor.
Last week, Russia struck Ukrainian ports, and its government added a warning that any attempts to send grain shipments from Ukrainian Black Sea terminals without Moscow’s security guarantees would come with risks. It stated that this was because Kyiv has been using those same waters for military purposes.
“There is every expectation that there will continue to be cover, but it might be at a price that is difficult,” said Marsh global head of marine and cargo Marcus Baker. “The safety and wellbeing of crew has to be a paramount consideration for every shipowner.”
The cargo insurance coverage already costs thousands of dollars and is expected to get more expensive. That said, shipowners themselves might hesitate to allow their vessels to travel through a war zone without an agreement from Russia. Moreover, floating mines are a notable concern.
“If you looked at the situation now compared to three or four weeks ago, the whole region is likely to be a riskier area,” said Baker.
The Black Sea region is already on the Lloyd’s of London high-risk list.
FAQ’s About Cargo Insurance
Q1: What is cargo insurance? A1: Cargo insurance is a type of insurance that covers physical damage to, or loss of, your goods while in transit by land, sea, or air. It protects the shipper in case any loss or damage occurs during the transportation process.
Q2: Who needs cargo insurance? A2: Any business that ships goods, either as the seller or buyer, can benefit from cargo insurance. This includes manufacturers, wholesalers, distributors, and companies that ship goods to customers directly.
Q3: What does cargo insurance cover? A3: Cargo insurance typically covers damage or loss due to accidents, natural disasters, loading and unloading operations, piracy, and other risks associated with transporting goods. The exact coverage depends on the specific policy and can vary based on the insurer.
Q4: Does cargo insurance cover theft? A4: Yes, most cargo insurance policies cover theft. However, it’s important to read the terms and conditions of your policy to understand what types of losses are covered.
Q5: How is the cost of cargo insurance determined? A5: The cost of cargo insurance is typically calculated based on the value of the goods being shipped, the mode of transport, the distance of the journey, and the specific risks involved.
Q6: Can I get cargo insurance for international shipments? A6: Yes, cargo insurance can cover both domestic and international shipments. In fact, it is particularly important for international shipments due to the increased risk associated with longer transit times and multiple modes of transportation.
Q7: What happens if my shipment is damaged and I don’t have cargo insurance? A7: If your shipment is damaged and you don’t have cargo insurance, you will likely be responsible for the financial losses associated with the damage. Depending on the terms of your shipping contract, the carrier may have limited liability and may not fully cover the loss.
Q8: Where can I buy cargo insurance? A8: Cargo insurance can be purchased from a variety of sources including insurance brokers, shipping lines, freight forwarders, or direct from insurance companies. It’s important to compare quotes and policies to ensure you’re getting the best coverage for your needs.
