Ships carrying Russian oil will soon be deprived of European insurance

The Europeans draw the weapon of insurance to try to weaken Russia even more as it continues its offensive in Ukraine. Member states of the European Union (EU) are due to unveil details of an agreement on Friday banning European insurers and reinsurers from covering ships carrying Russian oil. Britain has made the same commitment, revealed at the beginning of the week the “Financial Times”.

The measure was discussed as part of the sixth EU sanctions package against Moscow. Sharply negotiated in recent weeks, particularly with Hungary, it was finally adopted on Thursday by the ambassadors of the Twenty-Seven.

The new insurance sanctions are complementary to an oil embargo aimed at reducing imports of Russian black gold by 90% by the end of the year. It primarily targets oil transported by boat, Hungary having obtained, in the name of its energy security, specific treatment for supplies by pipeline.

Gradual entry into force

Preventing freighters from hedging would make it more difficult for Russia to continue financing its offensive against kyiv by selling its oil to countries other than Western countries. This type of measure has already been used in the past against Iran. The Europeans have also already banned providing Russian players with insurance and reinsurance cover in connection with aviation.

The ban on providing insurance coverage to ships carrying Russian oil would not come into force for six months, a transitional phase aimed at not disrupting maritime transport and the oil market too abruptly, currently under high tension .

The sanctions affecting the marine insurance sector should be all the stronger since they are adopted both by the Member States of the Union which are home to the giants of global insurance and reinsurance and by Great Britain. Brittany, home of the essential insurance market that is Lloyd’s of London. The Europeans thus waited to have the commitment of the United Kingdom that it would also apply this sanction. Otherwise it would have come down to serving him the market on a platter…

Shipowners’ mutuals at the center of the game

In order to collect material damage suffered by their vessels, shipowners can call on the London market or major international insurers such as AXA XL. To protect themselves against civil liability, for example in the event of pollution due to an oil leak, maritime transport players are also members of mutual insurance companies, known as “P&I Clubs”, which share the losses in the event of claims. important.

These “clubs” rely on a wide range of reinsurers, including European reinsurers. It may therefore be difficult for Russian oil transporters to find insurance that would not be affected by the sanctions. It remains to be seen whether alternative insurance solutions, for example Russian, Indian or Chinese, could come into play. Or whether players would be ready to do without insurance knowing that this can also complicate their access to ports.

Targeting insurance would be a way to circumvent the reluctance vis-à-vis a more direct ban on the transport of Russian oil. “On the tankers, everyone was ready to ban the transport of Russian oil provided that Japan and the United Kingdom did the same. Otherwise, we are simply transferring market share to them. But the UK was not ready to do so,” says a European source.

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