Insurance is essential for maritime transport, especially for oil cargoes which require the highest standards of safety due to the risk of spilling and shipping flammable materials on the high seas.
Before Western sanctions were imposed on Russia over its invasion of Ukraine, which Moscow describes as a “special military operation”, insurance for these cargoes relied on reinsurance with an international pool of companies offering wide coverage.
Western insurers withdrew cover from state-owned Sovcomflot (SCF) when Russia’s biggest shipping group was hit with sanctions, but Western insurance sources said Russian replacement cover would likely be sufficient to allow Russian ships to continue sailing.
Deputy Chairman of the Russian Security Council, Dmitry Medvedev, said this week that state guarantees would be offered as insurance for the transport of Russian goods, without giving details.
The sources, who declined to be identified due to the sensitivity of the issue, said RNRC, controlled by Russia’s central bank, was now the main company providing state guarantees to Russian insurance companies that offered coverage, such as Ingosstrakh, which insures Russian tankers, including the SCF fleet.
RNRC, Ingosstrakh and Sovcomflot did not respond to Reuters requests for comment.
Russia’s central bank said in March that it had raised RNRC’s capitalization from 71 billion rubles to 300 billion rubles and raised its guaranteed capital to 750 billion rubles so that the company would have adequate resources to provide reassurance.
“The increase in RNRC’s authorized capital will give Russian insurers broader opportunities to reassure risks inside Russia, build additional reinsurance capacity and manage new sanctions-related risks,” it said. she said in a report.
Vessels are commercially required to have Protection and Indemnity (P&I) insurance, which covers liability claims, including environmental damage and injury. Separate hull and machinery policies cover vessels against physical damage.
According to Ingosstrakh’s website, the company offers P&I reinsurance of up to $1 billion.
An equal amount was guaranteed by Japan and India for Iranian shipments made in 2012, a time when Iran was under Western sanctions and excluded from the global insurance market.
Western reinsurers typically have higher capitals, with allowances for different types of cover, such as marine insurance, which offers the full range of ship protection, Western insurance sources said.
“I would imagine that this (RNRC) capital is not purely maritime so could be burned very quickly,” said a Western insurance industry source.
The International Group of P&I insurers’ reassurance pooling program, which covers P&I insurance for approximately 90% of ocean-going vessels, is capped at a maximum of $3.1 billion for each incident.
Two sources in the tanker market said that the capitalization of the RNRC would allow it to act as a reinsurer for Russian ships on the international market without involving Western companies.
A source said similar insurance guarantees were provided by Iranian authorities when Western insurance companies failed to insure oil tankers carrying Iranian oil under sanctions.
Russian guarantees were likely to satisfy countries that still buy Russian oil, another of the Western insurance industry sources said, after the United States banned imports of Russian oil and the European Union agreed to phase in a ban.
Most Russian oil exports, especially from Sovcomflot tankers, go to Asian ports, mainly India and China, neither of which have imposed a ban on working with Sovcomflot.
The Indian authorities have already accredited Ingosstrakh as an insurance company for the transport of oil, which means that the ships it insures can enter Indian ports.