The difficulties of war risk insurance following the Russia-Ukraine conflict

Burkhard Fischer, Chairman of the Association of Accident Regulators, addressed the challenges facing the shipping industry at the annual conference in London. His presentation, “When the risk of war becomes the reality of war,” focused on the impact of the Russian-Ukrainian war on ships stranded in Ukrainian ports. Fischer highlighted how the conflict caught the shipping industry and war risk insurers off guard, leading to a unique situation where vessels were covered by basic war risk insurance without having to renew policies at higher premiums.

The unexpected scenario in 2022 saw around 70 foreign-flagged vessels detained in Ukrainian waters, potentially triggering constructive total loss claims without additional premiums. This raised debate on the need to reevaluate the current low level of basic war premiums. Fischer also discussed the challenges faced by shipowners and charterers, who had to navigate the decision of paying additional premiums or negotiating lower sums for insured vessels.

Fischer referenced the historical case of Scott v Copenhagen Reinsurance Co, which established that the commencement of hostilities was the triggering event for loss, not the cancellation of war risk policies. This ruling raised questions about insurance coverage for vessels stranded in Ukraine. As the industry continues to grapple with unprecedented challenges, Fischer emphasized the unique circumstances of each case and the ongoing need for industry-wide discussions to find solutions for the shipping industry and its insurance sector.

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