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Allianz report: Cost of bunker fuel could go up, availability down due to Ukraine war

12 May 2022

Marine insurer Allianz Global Corporate & Specialty (AGCS) on Tuesday (10 May) released the Safety & Shipping Review 2022 where it noted the effects of Russia’s invasion of Ukraine on the shipping industry.

This includes the cost and availability of bunker fuel which may force ship owners to use substandard alternative fuels. 

An expanded ban on Russian oil could contribute to increasing the cost of bunker fuel and impacting availability, potentially pushing ship owners to use alternative fuels. If such fuels are of substandard quality, this may result in machinery breakdown claims in future, says the insurer. 

The annual AGCS report, meanwhile, said the shipping industry has been affected on multiple fronts by Russia’s invasion of Ukraine, with the loss of life and vessels in the Black Sea, disruption to trade, and the growing burden of sanctions.

It also faces challenges to day-to-day operations, with knock-on effects for crew, the cost and availability of bunker fuel, and the potential for growing cyber risk.

It said a prolonged conflict is likely to have deeper consequences, potentially reshaping global trade in energy and other commodities.

“The insurance industry is likely to see a number of claims under specialist war policies from vessels damaged or lost to sea mines, rocket attacks and bombings in conflict zones,” said Justus Heinrich, Global Product Leader, Marine Hull, at AGCS. 

“Insurers may also receive claims under marine war policies from vessels and cargo blocked or trapped in Ukrainian ports and coastal waters.”

The report also touched on decarbonisation of the shipping industry creating new risks. 

With momentum gathering behind international efforts to tackle climate change, the shipping industry is coming under increasing pressure to accelerate its sustainability efforts, the report notes, given its greenhouse gas emissions grew by around 10% between 2012 and 2018.

Decarbonisation will require big investments in green technology and alternative fuels. A growing number of vessels are already switching to liquefied natural gas (LNG), while other alternative fuels are under development, including ammonia, hydrogen and methanol, as well as electric-powered ships. 

The transition to alternative fuels will likely bring heightened risk of machinery breakdown claims, among other risks, as new technology beds down and as crews adapt to new procedures.

Note: A full copy of the ‘Safety & Shipping Review 2022’ can be found here


Photo credit: Marine insurer Allianz Global Corporate & Specialty (AGCS)
Published: 12 May, 2022

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