The insurance of ships entering Ukrainian ports has been expanded to cover all cargoes

The expansion of the vessel insurance mechanism in the Black Sea will formally begin on March 1.

Unity Facility insurance in the Ukrainian maritime corridor has been extended to vessels that transport not only grain, but also any other cargo. This is reported by Interfax-Ukraine.

“By combining the efforts of the industry and the authorities, we were able to create a mechanism where the prices are much lower than half of those in the normal commercial market. And now, at this location, we’ve expanded that capability to include all cargo, not just grain,” said Oliver Wyman partner Crispin Alison at a political risk insurance webinar hosted by the US-Ukrainian Business Council (USUBC) and the Ministry US trade.

Formally, the operation of the mechanism begins on March 1, 2024, but the possibility of insuring all cargoes is already available.

After Russia’s withdrawal from the Grain Initiative, insurance rates increased only for the element of military risk to approximately 5%. This led to the suspension of shipping in the Black Sea during July and August 2023.

The Unity Facility was created using a public-private partnership. The Ukrainian government has allocated a compensation fund of $20 million to the initiative. Also, a parallel mechanism for cargo coverage is currently being considered, which supports EBRD financing for Ukraine.

The initiative allows insuring approximately 1,000 vessels per year with a maximum insured value of $50 million for each vessel. This ensures the export of about 30 million tons of grain. Access to the compensation fund is provided through letters of credit in banks and DZ Bank.

A relatively small amount of insurance capital allowed to export goods worth about 20 billion dollars. Its estimate is about 6-8% of Ukraine’s GDP.

In total, since the beginning of the maritime corridor in the Black Sea, Ukraine has exported almost 27 million tons of cargo.

We will remind you that the insurance mechanism for commercial vessels in the Black Sea was developed by Ukraine together with Great Britain. The Export Credit Agency, Ukrgasbank, Ukreximbank and a pool of 14 policyholders are involved in the mechanism.

Previously, USM wrote that Ukrgasbank and Ukreximbank issued letters of credit for $10 million each in favor of a pool of 14 British insurance companies.