The Russia-Ukraine War’s Impact on Global Shipping

Since the start of the Russian-Ukraine War on February 24, Australia has felt the ripple effect on global shipping.

Destroyed infrastructure and Ukraine’s ports under siege in the Black Sea mean countries that typically source commodities from there are looking elsewhere. Sanctions against Russia are also an indirect burden worldwide. Add to that supply chain bumpiness thanks to the pandemic.

There’s a lot at stake. More than 80 percent of the world’s traded goods go by sea, says the International Money Fund.

Impact of the war

The UN Conference on Trade and Development (UNCTAD) says disruptions directly and indirectly due to the war include:

  • Maritime trade logistics, increased shipping distances, transit times, and costs
  • Effects on container shipping availability and prices
  • Global food chains, hence more expensive food, such as grain
  • Rising energy and fuel prices 
  • Increased cybersecurity threats, and
  • Higher inflation and insurance costs.

How does marine transit insurance work?

Marine transit insurance is a misnomer because it is an overarching term covering all types of freight transport – not just shipping. This includes cargo transported by sea, rail, or air. However, there are two general types of marine insurance cover, ‘inland’ marine for land-based risks and ‘ocean’ marine for water carriage.

Essentially, sellers, customers, transporters, and their intermediaries use this cover to transfer their liability to an insurer. This means the exporter isn’t solely responsible for the goods arriving at the destination satisfactorily. 

Marine insurance encompasses the safe transport of material in all its forms, whether port to port, warehouse to warehouse or from raw material to delivered product.

Marine claims due to the Ukraine war

We’re yet to see a surge in marine claims to test coverage issues, but there are still legal and other questions about hull and cargo policies. The first claims could come from carriers who opt for the extra coverage for war. They’ll seek to deal with their liabilities when their ships become damaged or destroyed by sea mines, bombings, or rocket attacks within the Sea of Azov and the Black Sea. 

Non-war losses could happen due to:

  • Ships trapped in the Black Sea as well as Ukrainian ports
  • Unsafe navigation
  • Crewed vessels that can’t leave the area
  • Maintenance issues for the carriers
  • Cargo being damaged or abandoned in storage or transit.

The longer your goods are on the water, the more they risk. If your business sends or receives goods, marine transit insurance is valid and may be contractually required. More countries are also mandating marine insurance for ships used for commercial transport. This creates compliance challenges for shipping companies and insurers, with question marks arising over particular contracts.

Where we come in

While you know there’s ocean and inland marine insurance available to protect your goods, a range of cover options can make for a confusing choice.

For example, annual marine cargo covers manufacturers and suppliers of goods transported by land, air, or sea. Meanwhile, single marine cargo is a good fit for importers, exporters, or suppliers of goods for importing or exporting and may include land transport in Australia. Then there’s single marine transit ideal for ‘one-off’ carriage of goods within Australia.

Talk to us for your guide to customised cover that boosts your risk management in these uncertain times.