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Jul 13 UPDATE: Understood tanker was to be dry docked at Temryuk port and at the time fire broke out, was entering ship repair yard basin. Fire disabled the ship, pilot on board anchored tanker in basin, but later, because of threat of explosion, took AHMET TELLI to outer anchorage, with tugs assistance. As of morning Jul 13, remained at anchor.

Fire erupted in engine room of tanker AHMET TELLI at Temryuk port, Azov sea, Russia, in the evening Jul 9. Circumstances unclear, information given in statement issued by Russian Salvage Agency is so confused that it’s almost impossible to find out how it happened, what was tanker’s status at the time of fire, and what followed. Understood tanker was taken or moved to Temryuk outer anchorage, where she lost anchor, circumstances unknown. Tanker underwent dry docking prior to fire, understood in Temryuk, so all tanks were degassed and didn’t contain any cargo or residues. Fire was extinguished with the help of Russian Salvage Agency local branch firefighters. Tanker’s Chief Officer inhaled toxic fire emissions and had to be hospitalized, injures said to be not life-threatening. AIS is on, as of 1320 UTC Jul 12 tanker remained at anchorage.

Source: https://www.fleetmon.com/maritime-news/2022/38837/tanker-fire-azov-sea-russia/

An EU/UK plan to ban their insurers from providing cover to ships transporting Russian oil is causing tensions with Washington. America contends that Europe’s dominance of global insurance will make it very difficult for Russia to export oil if this goes ahead, potentially pushing oil prices far higher than they are already.

Yet this may not happen, because Russia is making moves to overcome the problem itself. The nation’s state reinsurance company, RNRC, is reportedly stepping in to take the place of western insurance companies by insuring fleets and their cargo. Russia will also now provide third-party liability and environmental damage cover in place of protection and indemnity (P&I) clubs. If these changes are viable for the long term, it will mean that a chunk of business that used to mostly go to European and British insurance companies will now be kept in Russia.

This is only one of numerous ways that western insurance is being affected by the war in Ukraine. Insurers are already facing serious losses from sanctions passed in March prohibiting provision of various types of cover to activities related to Russia. This is having significant knock-on effects across the board for business and society. So what is happening and where does it go from here?

Insurance and geopolitics

The insurance industry dwarfs the GDP of all countries in the world except China and the US. It was estimated to be worth over $5 trillion in premiums paid in 2021 and is set to grow 10 percent in 2022.

We’re all used to thinking of insurance companies as protecting people and companies against risks, but behind this lies another set of specialist companies known as reinsurers. These players insure insurance companies’ risks from say, losses arising from claims – in other words, they offer insurance taken out on insurance. In some cases, complex webs of insurance and reinsurance exist to make sure risk is adequately protected.

Prior to the invasion of Ukraine in February, there were instances where sanctions against Russia involved the insurance industry. When the US was putting pressure on Germany to abandon its NordStream 2 pipeline project, insurance and reinsurance companies were among those who pulled out until the Biden administration softened its approach.

This time around, it’s a whole different level. Claims have been made on policies related to aviation, maritime, trade credit, cyber and political risk. This only adds up to relatively modest exposure for the industry overall, but the potential long-term effects are another matter. Since the western sanctions were imposed in March, major players such as Lloyd’s of London, Swiss Re and SCOR and brokers such as Marsh, Aon and Willis Towers Watson have stopped taking new business from Russia. With a considerable amount of insurance previously provided to Russian sectors such as aviation and space in London and New York, for example, this is a major shift.

We are now in a situation where the world’s planes no longer fly through Russia. This raises the prospect of years if not decades of claims by the owners of up to 600 seized aircraft, many of which are leased.

Counting the cost

Estimating the overall hit to the western insurance industry from the deterioration in relations with Russia is not easy. This is not least because it very much depends on how much worse the current crisis becomes, and whether a political or military solution can be reached.

In early April, a report from S&P Global predicted that the losses to specialist categories such as aviation, maritime and political risk would be in the range of $16 billion to $35 billion. Lloyd’s of London alone was reported in March to be facing payouts in aviation and space of between $1 billion and $4 billion, which is one percent of its premiums.

The industry could be affected by payouts on claims for one or even two decades, acting as a drag on insurers’ balance sheets in the meantime. Those which have not yet offloaded their Russian business also run the risk of their policies being seized by the Russian government.

Meanwhile, premiums are on the up and up as insurers seek to make up for their losses – especially in all categories besides life insurance. Global aviation insurance premiums are said to have doubled as insurers seek to protect their profit margins. Premiums on oil tankers and other important cargo in the Black Sea, such as agricultural and cereal products, have also risen significantly. This will all feed through to higher prices for consumers and businesses, even apart from all the other inflationary pressures at present.

Another affected area is cyber insurance, which protects against the risks of cyber attacks. With Russia linked with numerous cyber attacks, both in relation to Ukraine and other countries, demand for cyber insurance has risen, yet it is becoming harder to obtain and therefore prices are spiralling.

Russia is a potential winner in much of this. Assuming sanctions continue, it is likely that western insurers will increasingly be substituted by Russian insurers (and those of countries that it deems friendly). For example, RNRC is already replacing western reinsurers in relation to other cargoes besides oil. Russia may also follow the model in Iran where various new government-guaranteed reinsurance pools, companies, P&I clubs and co-insurance (multiple companies providing cover) were set up in response to sanctions.

Russian sanctions and the enforced exodus of western firms from the Russian market leave Russia with the good fortune of having internal, inherited expertise and knowledge of the insurance and reinsurance business which it did not pay for. While western insurance firms need to absorb the hit from the sanctions, it is not completely clear that their Russian counterparts will suffer in the same way.

Source: https://www.maritime-executive.com/editorials/tanker-cover-ban-may-benefit-russian-insurers-and-raise-premiums

Gunvor is seeking an exemption for a 13m gallon gasoline cargo onboard the vessel BW Egret, Reuters reported.

The commodities trader blended feedstocks onboard the vessel in Europe rather than in onshore tanks making it non-compliant with the Jones Act. Gunvor said delivery of the cargo was in US national defense interests. The vessel is reported to be sitting off the US East Coast after sailing from Amsterdam.

Objections to the request for a waiver from the Jones Act have been raised by US domestic shipping body American Maritime Partnership.

“This unjustified Jones Act waiver request by Gunvor would pad the profits of foreign oil traders without delivering meaningful savings at the gas pump for American families. It’s a simple fact that the cost of gasoline is primarily driven by the price of crude oil and the processing of gas, which is spiking,” said Ku’uhaku Park, President of the American Maritime Partnership.

“The Jones Act is not a cost driver for increased gas prices, representing less than one cent per gallon of the overall cost of gasoline on average. Waiving the Jones Act outsources U.S. jobs and undermines America’s long-term economic security.”

The United States was assigned 80 percent of the responsibility for causing a deadly 2017 collision between the guided missile destroyer USS John McCain and a Liberian-registered oil tanker Alnic MC in the Singapore Strait according to a decision filed on June 15 by a U.S. District Court Judge in the Southern District of New York. In this 70-page decision, the judge reconstructs the minutes leading up to the collision as he sought to apportion liability for the collision and calculates the respective damages for the U.S. Navy and the tanker’s owners Energetic Tank.

The court decided to split the long-running case into two phases, with the first phase heard last November in a bench trial presided over by U.S. District Court Judge Paul Crotty. Based on this decision handed down yesterday, the case will proceed to a second phase where the court will then adjudicate the personal injury and wrongful death claims by the sailor-claimants against the shipping company.

The shipping company had sued in 2018 seeking to limit the compensation for any claims filed by the Navy, injured sailors, or the families of sailors who died in the collision to more than the $16.7 million value assigned to the tanker and her cargo. Energetic Tank sought to place blame for the accident entire on the U.S. Navy and the crew of the destroyer. While the Navy has admitted partial responsibility for the accident, they argue that the tanker played a role in the collision while the survivors and families of the 10 sailors killed when compartments on the McCain flooded argued the collision was entirely avoidable.

The court ruled that the McCain was primarily at fault for “creating a scenario where collision between the vessels was either inevitable, or all-but inevitable. However, Alnic bears significant blame for its failure to take any meaningful action to minimize the carnage caused by the collision.” The judge also considered efforts by the tanker’s operators at a cover-up and false statements in their defense.

The judge denies Energetic Tank’s petition for limitation of the liability and its petition for exoneration. Instead, using the $185 million damages to the McCain and 450 days it took to repair the warship, along with the $442,445 in damages to the Alnic, the judge ordered the tanker company to pay the United States $44.6 million.

“The rich trove of data from both vessels played an important role at trial. It helped to reassemble, second-by-second, exactly how the collision happened,” writes judge Crotty in his ruling. The decision constructions a moment-by-moment account of the events leading up to the collision.

Early on August 21, 2017, the USS John McCain was behind schedule and increased speed to 20 knots while navigating the busy shipping lane heading for a regularly scheduled port visit. Captain Alfredo Sanchez who was commander of the McCain, decided to overtake a group of slower moving commercial vessels including the Alnic, which was operating at 9.6 knots. Before reaching the vessels, the commander testified that he ordered transfer of thrust control to the lee helm so that the helmsman “could focus on steering, particularly given McCain’s proximity to nearby vessels.” An examination of the records reveals that only port thrust control was transferred and the vessel immediately went out of control. Confusion ensued on the bridge as the officers and sailors attempted to determine the problem and regain control.

The destroyer signaled its loss of control but the tanker failed to take appropriate evasive actions. Later they made false statements saying they had ordered a stop but in fact never ordered a stop and only ordered slower speeds when they observed the McCain.

Aboard the McCain, they were left to navigate the vessel with the ship’s Integrated Bridge and Navigation System, which the court refers to in its decision as “new, glitchy, and unwieldy, complicating McCain’s ability to navigate.”

The court denied the United States’ contention that the Alnic was 70 percent to blame instead saying that the McCain’s crew acted negligently by deciding not to stop outright after they had lost control of steering. “Despite his awareness of severe problems on the bridge, Commander Sanchez ordered the destroyer to continue forward at around 10 knots—still faster than many nearby vessels …. The crew had at least three minutes to press the All Stop button, which was available in plain sight on the IBNS touchscreen.” While noting it would not have been an immediate stop, the court cites the captain who said the vessel has impressive stopping power.

“There is no question McCain created the situation of danger in the Singapore Strait,” writes the judge. “The improper use of steering and thrust was entirely preventable.” The court also find that there was a longstanding lack of training for the McCain’s crew that sparked the confusion on her bridge and fueled the mistakes leading up to the collision.

The court also cites a list of problems with the Alnic leading to its decision to assign 20 percent of the blame to the tanker. Judge Crotty says the vessel’s bridge was improperly staffed hampering its ability to assess the situation and take steps to avoid the collision. He says the tanker could have slowed or turned away from the McCain. “Alnic’s most inexcusable fault, though, was her failure to do anything to mitigate the damage after colliding with McCain,” the judge writes while also citing false logs and statements. “The crew’s subsequent cover up confirms the apportionment of Alnic’s fault.”

Having concluded that Energetic Tank shall not be exonerated from liability, the court will proceed to the wrongful death and personal injury claims against the tanker company in phase two of the trial.