Russian Attacks Spark Surge in War Insurance for Ukraine Grains

Áine Quinn and Alex Longley
Thu, October 10, 2024 



(Bloomberg) -- The cost of insuring vessels that transit Ukraine’s shipping corridor in the Black Sea jumped this week after Russia ramped up attacks on key ports.

Coverage has now surged to above 1% of the value of a ship, according to two people involved in the market, who asked not to be named because the information isn’t public. That’s up from around 0.75% last week. For a $50 million ship, that would be an increase of $125,000 per voyage.

While ships sailing to and from Odesa have faced a risk of being targeted ever since Ukraine launched its shipping corridor last year, in recent days Russian attacks have intensified. So far traffic is resilient, but continued attacks could make shipowners more wary of sailing through the corridor, which has successfully exported large volumes.

Wheat futures traded in Chicago have risen about 2.5% so far this week, as risks to Black Sea exports have added to concerns over the weather in key producers.

Russia hit three vessels with missiles within four days, according to Ukrainian officials. An attack on Wednesday killed at least eight people and damaged a container vessel with a humanitarian cargo ordered by the United Nations for Palestine, Agriculture Minister Vitaliy Koval said. Russia also hit two ships loaded with grain in attacks on Sunday and Monday.

Ukraine is a major grain exporter, with agricultural commodities earning vital revenues for Kyiv. Over the last three months, Russia delivered more than 60 attacks to cripple Ukraine’s export capacity, said Infrastructure Minister Oleksiy Kuleba. That included 300 port infrastructure targets, 177 vehicles and 22 commercial vessels, while 79 civilians were wounded, including port employees, and crews from logistic companies and vessels, he said.

To be sure, the coverage rates are still fluid given the number of attacks, two underwriters said. The rates also vary from one insurer to another. Vessels can often get cheaper rates than market ones thanks to no-claims discounts.

One broker said that, since the attacks, traders have shown more interest in insuring their cargoes, which are covered separately from the ships themselves.

“This morning there have been new requests from clients for war risk insurance in Ukraine, and these are the clients to whom we previously offered this coverage and were not interested in it,” Maksym Dubovoy, co-owner of Atria Insurance Brokers, said.

--With assistance from Daryna Krasnolutska.