Marine policies face flood of claims at 12M mark of Ukraine war

Marine insurance markets are likely to be flooded with “total loss” claims for ships trapped in Ukrainian ports once the twelve-month marker rolls around late February, industry experts told a gathering of the Association of Average Adjusters and the  International Underwriting Association.

“This is a novel situation and there is therefore quite a lot of uncertainty,” Jonathan Bruce, deputy head of global insurance and reinsurance at law firm Holman Fenwick Willan LLP, said. “Unless things change quickly, it seems likely that there will be a lot of deemed total losses all in one ‘clump’ next February, and some quick decisions will need to be made.”

Ukrainian ports have been closed for vessel entry and exit since February 25, 2022, the day after the Russian invasion, and mines are reported to have been planted, effectively blocking as many as 100 vessels in ports and up rivers, the Association of Average Adjusters said. The full value of vessels trapped is unclear, but it could be as much as $800 million to $1 billion.

Detainment clauses to war risk policies usually trigger after twelve months and an addendum added in 1984 after the Suez Canal crisis and the Iran/Iraq war extended to situations in which waterways are blocked by war for 12 months.

“We can expect potentially a large number of deemed total losses all being claimed at the same time,” Bruce said.

Legal challenges are highly likely on a variety of fronts, including premium for continuation, cases where a ship is damaged in a military attack after policy cancellation but ahead of th3e 12-month detainment threshold, and on the question of aggregation of claims.

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