Jonathan Saul

LONDON, (Reuters) – As multiple sanctions bite Russia’s largest shipping company Sovcomflot, western ship insurance companies are ending their coverage. This adds to the increasing challenges facing the Russian state-owned firm and Moscow’s attempts to export oil and natural gas.

Russia’s maritime industry is experiencing the end of several services. This includes ship certification by top foreign providers. These are vital to access ports and secure insurance. After Russia invaded Ukraine, shipping companies have pulled out. Ship engine manufacturers also suspended training for their equipment.

Ships typically have protection & indemnity (P&I) insurance,

This policy covers third-party liability, including injury and environmental damage. Policies that cover machinery and hull separately protect vessels against damage.

P&I insurer West said in a statement: “In line with the applicable sanctions regimes, West has served 30 days’ notice of cancellation to Sovcomflot and cover will cease on 4 May 2022.”

Sovcomflot, (SCF), stated when it was contacted that its vessels are “insured in accordance with industry standards and international conventions”

UK Club, another P&I provider, said in order to comply with UK and EU sanctions it had “issued 30 day notices of termination to Sovcomflot in respect of their entered ships in early April”.

SCF is home to one of the largest fleets in the world of modern oil tankers, and gas carriers. Separate sanctions were imposed by Canada and the UK on SCF. However, the United States restricted SCF from capital raising in the financial markets.

SCF has been listed in the EU as among Russian state-owned corporations. It was prohibited from engaging directly or indirectly in any transaction with them after a winddown period that ended on May 15.

SCF did not specify what type of insurance they had. Shipping records show that several of the vessels were insured by previous players, including West, UK Club, and North.

Sources from ship insurance said that while Russian insurance would cover an instance, but payment issues due the financial sanctions on Moscow could cause problems for SCF tankers at Sea.

Russian ships have difficulty securing marine gasoline as the sellers of Russian fuel have stopped serving Russian flag-flagged vessels at European hubs such as Spain or Malta.

SCF ships that were previously covered under Norway’s Gard are no longer listed on the website.

Gard stated that it had complied all applicable sanctions. It did not comment on specific clients but spoke “directly to those who were affected by this situation”.

Mike Salthouse, a senior club manager with another leading P&I insurer North, said it had “gone down a contractual termination route notice for which has now expired so that there are no Sovcomflot vessels currently entered”.

He stated to Reuters that “the majority, if not all, of the clubs in question would have been unable to continue their business after May 15, when the winddown periods close and EU and UK bans on Sovcomflot insurance take effect.”

“The act of terminating an entry such as Sovcomflot is made more complicated because of the different legislative approach adopted by different jurisdictions. In order to resolve any discrepancies, clubs and insurers would have to take the time necessary not only for existing claimants but also for those of other parties.