SOME war risk insurers are said to be getting cold feet over the potential impact of sanctions and are declining to quote on calls at Russian ports in areas affected by fighting.

Huge additional premiums are being sought where the insurers are willing write cover at all, according to market sources.

The reaction to the hostilities in Ukraine has left some underwriters uneasy, with one senior figure accusing some in the sector of leaving clients “high and dry” where they already have a ship in the region.

Ukrainian ports remain closed by decree of the country’s maritime authorities in light of the Russian invasion, and explicit Russian threats to attack merchant shipping.

There is a wide range of pricing for calls to Russian ports in proximity to the conflict, with additional premiums (APs) ranging from the standard 0.25% of hull value to as much as 5%.

At the upper end of that spectrum, the APs might equate to six or even seven figure hits for every single voyage, depending on the value of the hull.

By way of comparison, APs of 0.8% levied following the seizure of British-registered Stena Impero (IMO: 9797400) by Iran’s Islamic Revolutionary Guard Corps in 2019 were widely condemned at the time as excessively high.

The latest developments come after the influential London-based Joint War Committee last month designated Russian and Ukrainian waters in the Black Sea and the Sea of Azov as listed areas, for which APs are charged.

The UK-based Warlike Operations Area Committee has declared a Warlike Operations Area with immediate effect for all Ukrainian, Russian and international waters north of 44°North in the Black Sea.

In consequence of the decision, shipowners have been asked to give seafarers the option the option to disembark prior to entering the area, or to receive increased pay if they agree to serve, and to insure their individual risks.

War risk premiums are negotiated on a voyage-by-voyage basis, with all factors taken into consideration, and can vary widely.

But the death of a seafarer on a Bangladeshi bulker off Odessa this week and the sinking of a Panama-flag general cargoship after it was shelled that same day will inevitably have hardened rates.

One underwriter said that he knew of no vessels planning to call in the Ukraine, in light of the port closures.

“For Russian Black Sea ports, let’s say Novorossiysk and stuff like that, there’s a huge range of rates, from 0.25% to 5.0% or something like that. There’s some sort of market equilibrium around 1%.”

However, the situation is being driven by sanctions more than the cost of insurance.

“It’s a much more tedious process now for operators to check everything. I talked to an owner yesterday, they were going to fulfil the voyages they were on but they were not going to receive any new bookings for that eastern Black Sea area.”

War risk insurance works by charging a low flat rate for worldwide cover excluding listed areas, as determined by the Joint War Committee.

Where ships enter or ‘breach’ these geographical limits, they typically have the option to ‘buy back cover’ by paying additional premiums known as ‘breach APs’ in sector jargon.

A prominent Lloyd’s market war risks underwriter described the market as split in several ways.

“Most interesting is that the MGA [managing general agent] market has for the most part been told to not offer terms. They have given notice to clients and now will not offer breach APs for their clients to buy back cover,” he said in an email. “There is also one of the US-owned syndicates that has taken this view.

“My personal view; very wrong to leave your clients high and dry when they have vessels stuck in a high-risk area. Some tonnage was already in the Black Sea before notice was given.”

That said, most underwriters are trying to support existing clients. But where owners have had cover pulled by their existing insurer, brokers are finding it tricky to gather support for breach-only cover, he added. “The extra dynamic making breach calls complicated is the ever-changing sanctions issue. Each underwriter is checking all parties involved in any Russian call, for obvious reasons.”