The Insurer

Alarm spread to shipping operators, some of whom ordered their vessels to postpone arrival in port pending clarification over the emergency. A risk of quarantine measures being extended from western provinces to the Black Sea added complication to an already muddied scene. Allegations surfaced that the hysteria had been prompted by political considerations ahead of the January 17, 2010 presidential election.

The panic illustrated how the waterfront can be hit by turmoil on land, or on campaign hustings. Recalling precedents of the restrictive consequences of SARS and bird flu, port chiefs and their insurers are having to re-scrutinise their business interruption cover, or in many cases their lack of it.

In particular, scope of cover can be unclear in the former Soviet republics. Twenty years after the collapse of the USSR, which had given businesses state protection, uncertainties abound. An inglorious example of the current state of play was the failure of the privatisation sale of Odessa port fertiliser terminal, one of Ukraine’s biggest state companies, at the end of September. This appeared to have been a victim of rivalry between president Viktor Yushchenko and prime minister Yulia Tymoshenko.

London brokers and underwriters have brought much order into coverage in the last two decades, and it is further reassuring that there is constructive debate on the spot about the way forward. Seminars such as one organised recently in St Petersburg, by Remedy law firm of Russia and International Law Offices of Ukraine, probe every liability aspect of the maritime kaleidoscope. That particular event, one of an annual series, was sponsored by leading Russian insurers Rosgosstrakh and RESO-Garantia.

More than 80 delegates journeyed through the complexities of claims handling and terms of contract, among other quandaries as to when claims should be directed to carriers, ports, forwarders or other parties. Since ship operators are being briefed so thoroughly on insurance as a means to efficiency as well as to financial protection, ports directors need to extend their interaction with insurers too.

In Ukraine, ports managed by the transport ministry have an annual plan which provides for the cost of insurance, although only for compulsory aspects including fire, and life assurance for dock workers. Stevedoring companies are obliged to insure state property which they lease. This leaves gaps: one source says that cranes which have been in operation for more than 30 years are rarely insured.

For ports that are struggling to make money, it can be expensive to buy insurance packages embracing property including quays, tugs, floating cranes and harbour craft; liabilities; loss of revenue from blockage of navigable channels or from loss of warehouses and handling equipment in fire or explosion; and removal of wreck expenses where shipowners evade responsibility.

Be that as it may, the insurance market is eager to assist – and after all, premium levels rely heavily on supply and demand.