Russian and Chinese insurance replaces EU
India and China buying may continue
Asian purchases of Russian crude are unlikely to be deterred by insurance-related issues after the G7’s base price regime takes effect next month, but logistical challenges will need to be addressed, some say Said one naval officer.
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Most of the 45,000 dwt size and above oil and product tankers participating in international trade carry cross-border marine insurance. This is provided by a global company, so wherever your cargo moves, your coverage will not be affected.
The latest round of sanctions against Russia has made the pitch weird. The UK, a hub for several marine insurers, has adamantly announced that it will not allow insurance cover for ships carrying Russian oil. A similar approach was expected from the European Union and the United States.
“The mainstream insurance industry does not cover such transactions with Russia, but there are some small bodies in Asia that do,” said a senior official at the P&I Club (Western Protection and Indemnity). Stated.
China has several insurers that could provide such facilities for Russian cargo, and the government would tacitly ask them to do so even if they were reluctant, officials said. . Chinese government officials could not be reached for comment.
Most of these cargoes are now covered by Russian P&I providers, said Oslo shipping and oil analysts.
A Singapore-based maritime insurance executive said unlike Western P&I clubs, which have boxes of cover and reinsurance worth billions of dollars, the alternative insurance that ships carrying Russian goods are taking is far greater. said to be small.
But such low-value insurance was used to keep the deal going, he said.
The International Group (IG) is made up of 13 P&I clubs, among them providing marine liability insurance for almost 90% of the world’s tonnage.
Debt beyond the holdings of individual clubs is currently set at $10 million and will be shared across all 13 clubs, subject to the terms of the pool agreement. These could potentially reach billions of dollars.
Most Asian sources say oil exports, at least to India and China, are unlikely to slow despite insurance-related problems. Russia has already emerged as India’s largest crude oil supplier, a far cry from the pre-war days when it was barely present in India’s import basket.
discreet and aggressive club
As the Japanese P&I Club is part of the 13-member IG, transactions with Tokyo require more transparent procedures. However, shipping industry executives were quick to point out that Japan is a relatively small player in the global crude oil trade.
A big player in the energy trade that could be difficult to circumvent the sanctions regime is South Korea, they said.
The P&I Club covers third party liability such as loss of life, injury or illness of crew, passengers or others, loss, shortage or damage to cargo, collisions and contamination.
All protection and indemnity or P&I insurance policies have built-in clauses that automatically exclude coverage for vessel voyages to locations authorized under UN, EU, UK and US law. I have.
Until about eight years ago, some P&I clubs were able to circumvent this provision and feign ignorance when tankers were loading cargo from then-sanctioned Iran. But when sanctions were again imposed on ships carrying Iranian crude, P&I clubs were much more cautious.
“The Western P&I Club can no longer claim to care nothing. The same officer from the P&I Club said.
Discounted Crude Oil, Freight Premium
Asian shipping sources say despite lengthy sanctions, there were still some tanker companies willing to load Russian oil and petroleum products even without insurance cover, although many of the destination ports were Not a practical proposition as we do not allow berthing without this precondition. .
“The whole system is too attractive to ignore. Importing countries don’t want to give up cheap oil, but shipowners are keen on cargo premiums.”
This will create a two-tier system of ships carrying Russian cargo and those that do not. Shipping companies listed on European and American stock exchanges cannot afford to do so.
In a September interview with S&P Global Commodities Insights, Eva Birgitte Bisgaard, COO of Maersk Tankers, said tanker companies such as Maersk were exempt from the Russian oil-linked base price because P&I club insurance cover would not apply. He said it would be impossible to transfer to EU countries. will be available.
A shipping broker in Copenhagen said this would not be a deterrent to several other privately held shipping companies.