Black Sea insurance rates soar as NATO fails to protect commercial shipping

When Russia attacked Ukraine, the closest US Navy or major NATO ally was in the Mediterranean. Now insurance rates are skyrocketing as peaceful ships come under attack as Russia breaches”Freedom of navigation” principles in the Black Sea.

By Jonathan Saul (Reuters) – Insurers have raised the cost of cover for merchant ships crossing the Black Sea, adding to soaring freight rates across the region for vessels still ready to sail after the invasion of Ukraine by Russia.

Also Read: The US Navy Left the Black Sea Unprotected

Shipowners pay war risk insurance annually as well as an additional “infraction” premium when entering high-risk areas. These separate bonuses are calculated based on the value of the vessel, or hull, for a period of seven days.

Ship insurers have quoted the additional premium rate for seven days at between 1% and 2% and up to 5% of insurance costs, down from around 0.025% on Monday before the Russian invasion began, according to indicative rates marine insurance sources.

This would mean additional costs of hundreds of thousands of dollars for a boat trip depending on the destination.

Watch: What does Russia’s invasion of Ukraine mean for global shipping?

“Given the Russian land, sea and air offensive, it would not be surprising if some insurers were hesitant (to provide cover),” an insurance source said.

A chemical tanker flying the Moldovan flag was hit by a missile on Friday near the Ukrainian port of Odessa, seriously injuring two crew members.

On Thursday, a Turkish-owned vessel was hit by a bomb off Odessa with no casualties and the ship sailed safely through Romanian waters.

Ukraine has called on Turkey to prevent Russian warships from crossing the Dardanelles and Bosphorus straits that lead to the Black Sea, after Moscow launched a full-scale assault on Ukraine on Thursday.

Russian forces landed at Ukrainian ports in the Black Sea and Sea of ​​Azov as part of the invasion.

Ukraine’s military has suspended commercial shipping through its ports, although some Russian Black Sea ports remain open, including Novorossiysk, traders said on Friday.

“Due to the potential for maritime invasion and Crimea’s location in the Black Sea, cargo destined for neighboring countries will likely see re-routings and longer transit to reach its final destination,” added Glenn Koepke of the FourKites supply chain tracking platform.

Mark Nugent, with ship broker Braemar ACM, citing satellite tracking data, said a number of dry bulk carriers in the Black Sea had reversed course and were sailing towards the Bosphorus to leave the region.

Freight rates jumped after shipping lines, including the world’s leading container companies, MSC and Maersk, and many tanker owners suspended crossings in the region.

Average earnings of small Aframax tankers trading in the Black Sea jumped to more than $100,000 a day on Thursday from $8,000 a day on Monday, shipping sources said.

Earlier this month, the London Marine Insurance Market added Ukrainian and Russian waters around the Black Sea and Sea of ​​Azov to its list of areas deemed high risk, prompting some shipping companies to refrain from sending ships to the region.

(Additional reporting by Michael Hogan in Hamburg and Carolyn Cohn in London; Editing by Nick Macfie)