A number of insurance underwriters are interested in providing cover for grain shipments from Ukraine after an agreement was reached to re-open Black Sea ports, although the first shipments are expected to be weeks away, industry sources said on Friday.
Russia and Ukraine signed a landmark deal on Friday to reopen the ports for grain exports, raising hopes that an international food crisis aggravated by the Russian invasion can be eased. The accord crowned two months of talks brokered by the United Nations and Turkey, a NATO member that has good relations with both Russia and Ukraine and controls the straits leading into the Black Sea.
Securing shipping and insurance will be a crucial part of the process ahead.
"There are a number of underwriters who have expressed an interest in writing this risk and one or two brokers also. It may well be a consortium that is formed," Neil Roberts, head of marine and aviation with the Lloyd’s Market Association, told Reuters.
"A number of things are still to be resolved and underwriters will need to assess voyages individually," said Roberts, whose association represents the interests of all underwriting businesses in the Lloyd’s of London insurance market.
Ukraine's ports have been closed since Russia's invasion in February, which Moscow calls a "special military operation," and not enough is known about the condition of the ports as well as risks such as floating mines and damaged ships in port areas.
"Shipowners will need some form of financial assurance. So at least the first few voyages need to prove that the routes are safe," a shipping industry official said.
The initial problem is that there are over 80 ships stuck in Ukraine, many with cargoes onboard including grain, which need to get out before new ships can go in, sources said.
The LMA's Roberts said the details underwriters need included "what ships can be reactivated from those that are currently alongside (in Ukrainian ports)".
"We would anticipate some kind of test run to give comfort to commercial interests. We would not expect that vessels would start coming out for at least a couple of weeks," Roberts said.
"Then there is the question of the chartering and who is arranging what. It is going to take a bit of time to get those contracts in place."
The LMA has placed Ukrainian waters on their high risk zone and any sailings need to get approval from underwriters, who are waiting for more detail on the specifics of how the agreement will work.
“The will is there for this humanitarian initiative, but underwriters cannot give any idea of the sort of cover or the prices until they know more,” an insurance source familiar with the situation said. "It’s how quickly it can get from the diplomatic table to a plan that actually evolves."
A blockade of Ukrainian ports by Russia's Black Sea fleet, trapping tens of millions of tonnes of grain in silos and stranding many ships, has worsened global supply chain bottlenecks, and along with sweeping Western sanctions, stoked galloping inflation in food and energy prices around the world.
James O'Brien, head of the U.S. State Department's Office of Sanctions Coordination, said their focus was on "seeing the agreement implemented fully".
"Based on our conversations with insurers, if there's full implementation of this arrangement, we do think that both insurance and ships will be available," O'Brien told reporters on Friday.
Guy Platten, secretary general of the International Chamber of Shipping, a global trade group, said it was ready to work with all parties.
“Ensuring crew safety will be crucial if we are to get this agreement moving quickly," Platten said. "Questions remain over how ships will navigate heavily mined waters and how we can effectively crew the ships in the region to meet the suggested deadline."
(Reuters - Reporting by Jonathan Saul; editing by Diane Craft and Leslie Adler)