The Unity Insurance Facility, which was launched in November 2023 to provide affordable insurance to facilitate the export of grain and other critical food supplies from Ukraine’s Black Sea ports through the Ukrainian maritime corridor, has been expanded to cover ships carrying not only grain but also other cargoes from February 2024.
Crispin Ellison, a partner at consulting firm Oliver Wyman, said this at an online seminar on political risk insurance organized by the U.S.-Ukraine Business Council (USUBC) and the U.S. Department of Commerce, the CFTS portal reports, citing the GMK Center.
"By getting the industry and government to come together, we've been able to produce a facility where the rates are well under half of those on the normal commercial market. And now, this month, February, we have expanded this facility to cover shipping carrying all cargo, not just grain," Ellison said.
According to him, this is essentially a tripling of the facility, which was to be formally launched on 1 March 2024 but was already available at the time of the online seminar.
Ellison said that when Russia withdrew from the Black Sea Grain Initiative in July last year, insurance rates - just for the war risk element - rose to about 5%, which was completely unaffordable and led to the suspension of shipping in July-September.
The Unity Insurance Facility makes it possible to insure around 1,000 vessels, offering up to USD 50 million in hull and separate protection and indemnity risk insurance per vessel, which will enable the export of about 30 million tons of grain. The reimbursement fund is accessible through letters of credit held by Ukrainian banks and underwritten by DZ Bank.
According to materials presented by Ellison at the online seminar, the parties are also considering a parallel cargo insurance facility supported by the European Bank for Reconstruction and Development (EBRD) funding for the Ukrainian government.
Ellison emphasized that a relatively small amount of insurance capital has enabled the export of about USD 20 billion worth of goods, estimated at 6%-8% of Ukraine's GDP.
As the CFTS portal reported previously, in November 2023, Ukraine and a pool of British insurance companies set up a mechanism to make the temporary Black Sea corridor more accessible to exporters.
"As a result of the agreements between President of Ukraine Volodymyr Zelenskyi and British Prime Minister Rishi Sunak, Ukraine and a pool of British insurance companies have created a special mechanism. It will allow exporters of all products from Ukraine to receive a discount on the cost of insurance against war-related risks. This will make the Black Sea corridor more accessible to a wider range of exporters," Ukraine’s Prime Minister Denys Shmyhal said at the time.
The Ukrainian prime minister emphasized that the Cabinet of Ministers has allocated funds to cover possible war-related risks for shipowners. The mechanism involves the Export Credit Agency, Ukrgasbank, Ukreximbank, and a pool of 14 insurance companies.
As the CFTS portal reported earlier, the fund for insurance of civilian ships, which was created to encourage shipowners to send ships to Ukrainian Black Sea ports in the face of Russian aggression, was reduced during the drafting of the Ukrainian state budget for 2024. The total amount of compensation was initially expected to be up to UAH 20 billion, but only UAH 2 billion was budgeted for 2024 under the relevant article of the draft state budget (at least in its first reading).
