We would like to provide a follow-up to our Circular No. 22-012-1 dated 21 September 2021 in order to answer some inquiries we have received on insurance coverage.

FAQs issued by EU

In the Circular, we set out how the EU had further amended its FAQs of August 2022 on 19 September 2022 to show that the transport of coal and certain specified goods in Annex XXI of Council Regulation 833/2014 (hereinafter referred to as "subject goods") and related insurance is in fact not prohibited when the goods are being carried to third countries. However, it is not possible for us to say with certainty that there is no obstacle to insurance coverage for the transportation of the "subject goods" from Russia to third countries other than EU.

Our insurance for ocean-going vessels owned by Members, and EU sanctions against Russia

Please see attached diagramme of International Group Reinsurance Programme for details of the insurance and reinsurance programme for ocean-going vessels owned by Members (it can also be found here).

Club retention

As at 18 October 2022, in principle, we will be able to provide insurance coverage for claims below USD10 million, the amount retained by each Club (i.e. each Club's own account), arising out of the transportation of "subject goods" from Russia to third countries. At the same time, we believe it is important to respect the objectives of sanctions against Russia by the EU, USA and other countries in light of the changed international situation. Our interpretation of the insurance coverage situation does not imply that we are encouraging members to transport "subject goods" from Russia to third countries.

Reinsurance

If our entered vessels cause claims in the range USD10 million to USD100 million, part of those losses/damages will be shared (reinsured) by the other 12 Clubs in the IG. Moreover, the IG arranges reinsurance in the commercial market for claims exceeding USD100 million. As each Club and reinsurer operates under different legal circumstances, including national regulations and authorities' guidelines, there remains uncertainty whether any other Club or reinsurer would be able to pay any reinsurance money to us, for losses or damage concerning the carriage of "subject goods" from Russia to third countries. In addition, we arrange our own reinsurance for losses below USD 10 million, and it is also uncertain whether any reinsurance money could be paid in respect of this programme.

If our entered vessels cause losses/damages arising out of the carriage of "subject goods" from Russia to third countries and there is a shortfall of reinsurance money payable from other Clubs and/or reinsurers due to sanctions, in accordance with our Rule 36 (9), the members cannot recover this shortfall from the Club. This means that members themselves will have to bear the shortfall.

Sanctions

As Members are fully aware, the situation surrounding Russia and Ukraine is quite unstable. Also, sanctions imposed by the EU (and other entities) against Russia change quite frequently, depending on the passage of time and fluctuating international situation. Moreover, in addition to actual sanctions, also changeable are the variety of regulations of different nations, guidelines of relevant authorities and the policies of respective Clubs and reinsurers, so whether insurance coverage can be provided (or not) is also subject to change. Under such circumstances, we cannot affirm that any Club or reinsurer can provide coverage in the event of loss or damage concerning the carriage of "subject goods" from Russia to third countries.

Moreover, even if a Club and reinsurer thought they were able to provide insurance coverage, it is likely that a bank, with a different risk appetite, would refuse to process the transaction.