However, at the moment, it is actually impossible to assess the effectiveness of the mechanism of the insurance fund, which was introduced by the Cabinet of Ministers in the summer
The opening of the maritime export corridor in August-September and its relatively stable operation allowed Ukraine to significantly increase its exports through seaports, as the ports of Greater Odesa became open in addition to the Danube. So far, 250 vessels have used the corridor, exporting 9 million tons of cargo.
After the international Initiative for the Safe Transportation of Grain and Foodstuffs from Ukrainian Ports (the Grain Agreement) was terminated in July, the Export Corridor operates exclusively through Ukrainian legislation and generally recognized provisions of international law. There is no special agreement and no international arrangements anymore. We are talking about the seaports of Odesa, Pivdenny and Chornomorsk.
The export corridor started working after the Ukrainian Navy announced a temporary sea corridor in August.
It is already known that the temporary corridor is now used not only to ship export cargo from Ukrainian ports, but also to import cargo, so it is no longer correct to call the corridor only “export”. About 250 vessels have used the temporary corridor, loading 9 million tons of cargo.
In June 2023, the Cabinet of Ministers of Ukraine introduced a new procedure that guaranteed compensation for damage to shipowners, ship owners, and compensation for losses caused by the armed aggression of the Russian Federation.
Such guarantees apply to situations where the damage arises as a result of the armed aggression of the Russian Federation, while the vessel is in the territorial waters of Ukraine (12 miles), if they are transporting cargo to or from open ports of Ukraine.
Compensation is provided for the following types of damages:
- Damages that the ship cannot recover due to its death or destruction (total loss).
- Costs for the restoration of structural damage to the vessel.
- Damages due to loss or damage to cargo.
- Expenses related to damage to the health of crew members.
Ukraine guarantees compensation only if the shipowner’s insurance company has refused to pay insurance indemnity.
Such applications for compensation should be submitted to the Ministry of Communities, Territories and Infrastructure Development of Ukraine, together with supporting documents, no later than 90 calendar days from the date of the insurer’s refusal to pay insurance indemnity.
With regard to reliability, it is worth noting that the above fund has not had the opportunity to prove itself in action. De jure, the provisions are clear and not overwhelmed by bureaucracy. At the same time, it is impossible to impartially assess their de facto work, including human factors, as of today.
It is also impossible to assess the level of interest in such a fund on the part of shipowners, as there is no experience. In our opinion, the existence of the fund undoubtedly makes it more attractive for ships to call in Ukraine, but whether it is interesting for a particular shipowner is a subjective question.
In the state budget of 2023, UAH 20 billion ($547 million) was allocated for the creation of the insurance fund, but these funds were not used. In the state budget for 2024, the size of the ship insurance fund against military risks was reduced by 10 times to UAH 2 billion (at the expense of the state budget reserve fund). In mid-November, the Cabinet of Ministers allocated funds to guarantee coverage of losses in the event of an eventuality. The mechanism involves the Export Credit Agency, Ukrgasbank, Ukreximbank, and a pool of 14 insurers. The total amount of coverage under the program is $50 million. But this mechanism has not yet been launched.
Unfortunately, the risk of drones and missiles hitting ships and port infrastructure is still relevant. However, from the statistical point of view, as of 11.12.2023, the security situation for shipowners is as positive as possible in a time of war.
The only case of a direct hit on a foreign commercial vessel during the temporary export corridor was the hit on the Kmax Ruler in Pivdenny port, which at that time was supposed to deliver iron ore from Ukraine to China. In addition, the bulk carrier Georgia S, which left Pivdenny in mid-November with a cargo of wheat, hit a sea mine near the Ukrainian coast and sustained minor damage.
Also, as of December 11, about 200 port infrastructure facilities were reported damaged.
Thus, in general, the situation for the maritime industry is statistically unpredictable and extremely difficult, and working in such conditions is a manifestation of heroism on the ground, which is not talked about much.
As for shipping, the situation is statistically better. Shipowners provide for the necessary “clauses” in charter contracts, which regulate the range of rights and obligations of the parties caused by the war, and, as we can see from the quantitative data, are ready to take reasonable risks.