Ukraine initiates insurance of ships against war risks

The Ukrainian government has established a new mechanism for insuring ships against war risks, significantly reducing insurance premiums for carriers involved in maritime imports and exports to and from the country.

What's the problem?

This move comes in response to the increased risks faced by Ukrainian ports and grain infrastructure in the south of the country due to Russian attacks following the aggressor's withdrawal from the "grain deal" in July. Almost daily, Russia launches UAVs and missiles toward southern ports.

Despite these threats, in August, Ukraine announced the opening of temporary corridors in the Black Sea for commercial vessels. The Ukrainian Navy stressed that the threat from Russia persists.

In response, the government declared its intention to begin insuring ships traveling through the "grain corridor" at the expense of the national budget.

What's the solution?

In early November, the Cabinet of Ministers approved a decision to guarantee the safety of navigation and promote the stability of maritime transport.

"Ship insurance has become possible thanks to cooperation with leading British reinsurance companies — Marsh McLennan and Lloyd's of London underwriters — through the launch of the Unity Facility mechanism," said Ukraine's First Deputy Prime Minister and Minister of Economy Yulia Svyrydenko.

How does it work?

"The total coverage under this program is $50 million," said the head of the ministry.

According to Svyrydenko, this decision will have a positive impact on the work of grain traders. The new mechanism will reduce the cost of grain insurance by approximately 2.5 percentage points of the insurance tariff.

This, in turn, will allow grain traders to save about ₴100-140 per ton of cargo, bringing an additional ₴4.0 billion to agricultural commodity producers.

According to the ministry, in the 2023-2024 marketing year, about 50.7 million tons of grain are expected to be exported based on forecast calculations. In the current marketing year, Ukraine has already exported nearly 9 million tons of grain.

As a reminder, the government allocated ₴800 million to the Ministry of Economy (for PJSC "Export Credit Agency") to ensure the payment of compensation to insurance companies and reinsurance companies for expenses incurred in fulfilling insurance and reinsurance contracts.

Since all exporters have not returned approximately $8 billion to Ukraine, the National Bank has decided to halve the period for returning foreign exchange earnings for exporters of agricultural products from 180 to 90 days.