Insurance rates in the ports of Greater Odessa decreased to 0.35-0.4%

Military cargo risk insurance is critical to the success of maritime exports and imports through the ports of Great Odessa.Since the resumption of exports through the seaports in 2022, insurance rates have decreased from 4-5% to 0.35-0.4% of the value of the cargo as of today.

Factors influencing insurance rates

Cargo insurance – both export and import – in the current environment is divided into two main lines of business: military EWRI cargo risks and standard All Risks insurance (ICC A, GAFTA/FOSFA, etc.).

Insurance rates under All Risks (ICC A) have not been affected by the war in Ukraine. Only at the very beginning of the full-scale invasion, when the main cargo traffic passed through the Danube ports, the rates were higher. This is explained by the fact that the vessels entering Ukrainian ports were old and in poor technical condition, had no IACS classification and no IGP&I shipowner’s liability insurance.

In fact, the age of the vessel, its technical condition and ship’s documents are the three main factors, which the underwriter takes into account when forming the tariff for cargo insurance. With the beginning of full-fledged operation of the ports of Big Odessa this factor has lost its relevance, as the quality of the fleet has significantly improved.

The factors influencing the cost of insurance of military cargo risks are quite obvious. The key one is the general security context in the region. The more damaged ships and injured crews, enemy threats, missile and drone attacks, and reports of an increase in mines – the higher the insurance rates will be.

Rates for military cargo risks in the ports of Greater Odessa started at 4-5% of the cargo value (at the beginning of the first “grain corridor” in 2022), and gradually decreased to 0.35-0.4% as of today.

Thus, the cost of insurance of military cargo risks had a steady downward trend – almost 10 times. Only in certain periods, during massive attacks on ships in the Black Sea (e.g. September-October 2024, when at least 7 ships were affected), there was a temporary increase in rates.

Current insurance practice

There are no difficulties with standard cargo insurance (All Risks). The number of underwriters with insurance capacity to cover war risks in Ukrainian territorial waters is limited. However, the available capacity is sufficient to meet the demand.

Key points to be paid attention to when insuring military cargo risks:

• the reliability of the insurer or its reinsurance program;
• terms and conditions of the insurance policy, including the amount of deductible;
• the number of days of insurance coverage in the High Risk Area;
• a clearly defined mechanism for entry into force of coverages;
• conditions under which the insurer has the right to withdraw coverage already provided.

Unfortunately, cases of insurance payments for military cargo risks in our region are not uncommon. One of the examples is compensation to cargo owners for cargo damage to the container ship Shui Spirit, which occurred after a missile attack on the Black Sea fishing port.

To summarize: insurance of military cargo risks is a necessity caused by modern realities. There is no more effective tool to protect the interests of cargo owners today. Besides, the rates have become more affordable since the war started.

Forecast of insurance rates

Under current conditions, insurance rates for war cargo risks are likely to remain in the range of 0.35-0.4% with a possible downward trend to 0.25-0.3%. But in case of reaching a truce agreement or stabilization of the situation in the Black Sea, the reduction of rates may be significant.