War insurance costs spike for ship owners as Black Sea threats grow, sources say

By Jonathan Saul

LONDON, Dec 4 (Reuters) - War insurance costs for ships sailing to the Black Sea have spiked again, with insurers reviewing policies daily as the conflict in Ukraine spills into sea lanes, five shipping and insurance sources said on Thursday.

The Black Sea is crucial for the shipment of grain, oil and oil products. Its waters are shared by Bulgaria, Georgia, Romania and Turkey, as well as Russia and Ukraine.

Turkey's Foreign Minister Hakan Fidan said on Wednesday that attacks on Russia-linked tankers in the Black Sea in recent days threatened the safety of all in the region and showed that the reach of the war in Ukraine was expanding.

Ships sailing into Russian or Ukrainian Black Sea ports or terminals around the Sea of Azov require additional war-risk insurance, typically set for a seven-day period.

PUTIN THREATENS TO SEVER UKRAINE'S SEA ACCESS

Underwriters previously reviewed the terms of war insurance every 48 hours, but the latest developments have prompted daily reviews, the sources said.

Russian President Vladimir Putin threatened on Tuesday to sever Ukraine's access to the sea in response to the tanker attacks, adding that Moscow would take measures against tankers of countries that helped Ukraine.

The difference between war insurance costs for Russian and Ukrainian ports had narrowed in the past two days. Russian ports had previously commanded higher premiums, the sources said.

War insurance costs for some port calls have been quoted between 0.6% and 1% of the value of a ship in the past day by some underwriters, up from 0.4-0.6% last week, they added. 

Rates of 1% would be the highest since late 2023, though still below peaks of 2% for the Red Sea at the height of attacks by Yemen's Houthi militia in 2024, market estimates show. 

Small rises translate into tens of thousands of dollars of additional daily costs for insurance alone.

One option insurers may consider is to cancel cover entirely, though there is no sign of that happening yet, the sources said.

Additional war premiums are likely to increase "if the rhetoric from Russia translates into attacks on shipping in the Black Sea", said Marcus Baker, global marine leader at insurance broker Marsh.

"We may also see an expansion in the area of perceived enhanced risk if further attacks on Turkish shipping take place closer to Turkey."

In an effort to ensure uninterrupted energy flows, Turkey has told Russia, Ukraine and all other parties to keep energy infrastructure out of their conflict.

Ukraine, which has been targeting Russian oil exports while Moscow bombards the Ukrainian power grid, took responsibility for an attack on two empty tankers heading towards a Russian port last week. But Kyiv denied any link to an incident on Tuesday, in which a Russian-flagged tanker loaded with sunflower oil said it had come under drone attack.

"Threat levels for tankers calling (at) Russian ports and vessels calling (at) Ukrainian ports have significantly increased," British maritime security company Ambrey said on Thursday, adding that shipping companies should request hull inspections to check for limpet mines after Russian port calls.    

(Reporting by Jonathan SaulAdditional reporting by Jonathan SpicerEditing by Mike Collett-White and David Goodman)