The shipping industry has been affected on multiple fronts by Russia’s invasion of Ukraine, with the loss of life and vessels in the Black Sea, disruption of trade, and the growing burden of sanctions, according to Allianz shipping review 2022.
According to the global insurance leader, 54 large ships were lost worldwide last year. Total losses down 57 percent over the past decade.
South China, Indochina, Indonesia, and the Philippines top loss locations, while the Arabian Gulf saw a significant increase in loss activity to rank second. Southeast Asian waters are replacing the Gulf of Guinea as the most dangerous for commercial shipping.
The invasion according to analysts at Allianz has further ramifications for a global maritime industry already facing shortages. Russian seafarers account for just over 10 percent of the world’s 1.89 million workforce, while around 4 percent come from Ukraine.
These seafarers may struggle to return home or rejoin ships at the end of contracts.
“The insurance industry is likely to see a number of claims under specialist war policies from vessels damaged or lost to sea mines, rocket attacks and bombings in conflict zones,” explains Justus Heinrich, global product leader, Marine Hull, at AGCS.
He said: “Insurers may also receive claims under marine war policies from vessels and cargo blocked or trapped in Ukrainian ports and coastal waters.”
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The evolving range of sanctions against Russian interests presents a sizable challenge. Violating sanctions can result in severe enforcement action, yet compliance can be a considerable burden. It can be difficult to establish the ultimate owner of a vessel, cargo or counterparty. Sanctions also apply to various parts of the transport supply chain, including banking and insurance, as well as maritime support services, which makes compliance even more complex.
Meanwhile, a prolonged conflict is likely to have deeper consequences, potentially reshaping global trade in energy and other commodities. An expanded ban on Russian oil could contribute to pushing up the cost of bunker fuel and impacting availability, potentially pushing ship owners to use alternative fuels. If such fuels are of substandard quality, this may result in machinery breakdown claims in future. At the same time, security agencies continue to warn of a heightened prospect of cyber risks for the shipping sector such as GPS jamming, Automatic Identification System (AIS) spoofing and electronic interference. Prior to the Ukraine invasion there had already been a number of these incidents, reported in the Middle East and China.
