Per reports, Ship reinsurers have faced huge losses, and hence the insurers of ships have decided to cancel covering war risks in Russia, Belarus and Ukraine from January 1, 2023.
Ship insurers are insured by the reinsurers who renew their twelve-month agreements with their insurance clients on 1st January. Now that the new year is about to begin, it is an opportunity for the reinsurers to step back since the situation in Ukraine led to losses along with the havoc caused by the Ian hurricane in Florida.
Marine Reinsurers, also known as the P&I (protection and indemnity) clubs are in no position to provide coverage for risks associated with war in the region from 1st Jan, as many of them mentioned the same on their websites. These clubs are among the largest in the world. Around 90% of the world’s vessels come under their ambit.
One of the clubs, the UK P&I mentioned that this problem had come to the forefront due to the lack of reinsurance for the reinsurers, which is called retrocession.
Vessels have P&I insurance that covers about one-third of liability claims such as damage to the environment and any injuries. There are other hull and machine policies that cover the ships for any physical damages.
The withdrawal of reinsurance is applicable to a few but not all kinds of policies provided by the P&I clubs, per reports.
However, this move will make it difficult for charter companies to insure their ships, leading to an increase in prices and might mean that some ships will ply without insurance.
The major reinsurers include Hannover Re, Munich Re and Swiss Re. The government of Japan is urging the insurers to take risks and offer war insurance at least for LNG shipping companies in the waters of Russia.
References: Live Mint, TVP World
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