Ukraine negotiating grain corridor with international insurers

Ukraine is wrapping up negotiations with the international insurance market regarding a system for insuring grain cargo ships heading for Ukraine's Black Sea ports. The deal will likely be backed by Ukraine's state road fund. Source: Oleksandr Hryban, special envoy for Ukraine's economy ministry, in a comment for the Financial Times

Details: Gryban told the Financial Times that the deal was "currently being pursued and actively discussed" between the relevant ministries, as well as local banks and international insurance groups including Lloyd's of London. Kyiv is being advised by professional services group Marsh McLennan, which includes consultancy Oliver Wyman and the world's biggest insurance broker Marsh, on a pro bono basis.

The scheme could be put in place as early as next month, and could see as many as 5 to 30 ships covered to travel through what he described as the "danger spot" of Ukrainian waters. The number of ships will depend on how exactly the scheme will operate and how the risks will be shared between the Ukrainian government and private insurers.

The details have yet to be confirmed, but sources involved in negotiations told the FT that the scheme will be aimed at protecting the ships from damage, and the risk will be spread among the insurers and a local state-owned bank. One source said that the bank could provide a letter of credit as collateral. A letter of credit is an obligation of the foreign buyer's bank to make a payment after the exporter ships the goods and provides the necessary documentation to the exporter's bank as proof.

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Hryban said the public portion of the risk would likely be backed by the country's state road fund, which was created to repair Ukrainian roads and is funded by a tax on fuel sales. "Ukrainian officials believe their missiles can protect a corridor within 100 nautical miles of its coast. But given the military risks, affordable insurance would be essential to reviving commercial shipping activity at any significant scale," the FT reported.

Marcus Baker, global head of marine, cargo and logistics at Marsh, said that "a public-private partnership, with insurers working in tandem with the Ukrainian government, will give greater confidence to shipowners to return to delivering Ukrainian grain around the world to those countries that need it most". Background:

• On 16 August, Ukrainian President Volodymyr Zelenskyy said that the first civilian ship had left the port of Odesa and was travelling through Ukraine's new temporary corridor for civilian ships. The ship, Joseph Schulte, had been in the port of Odesa since 23 February 2022.

  It arrived in Istanbul, Turkiye, two days later.

• The last ship with Ukrainian food exports left the port of Odesa on 16 July, the last day before Russia withdrew from the Black Sea Grain Initiative.

  After that, Russia repeatedly attacked Ukraine's port infrastructure.

• On 10 August, Ukraine announced the creation of temporary corridors in the Black Sea for trade vessels heading to and from Ukrainian ports.

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