Oil Tanker Insurance Payouts at Risk After UK’s Russia Sanctions

July 23, 2024 by

Transfers of oil at sea that involve a recently sanctioned Russian insurer may prevent western firms from paying claims if something goes wrong, a key provider of cover said.

Moscow-based Ingosstrakh PJSC has emerged of a major insurer to Russian oil-carrying vessels, but was sanctioned by the British government last month.

Those measures could constrain the ability of UK-based insurers to pay out in the event of a spill, particularly if one were to happen when oil was being transferred between two ships, West of England P&I Club said in a notice on its website. West said it would considered a “UK person” under the rules.

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Prior to the invasion of Ukraine, almost all oil tanker cover was provided by a handful of mutual insurers that fall under an umbrella group called the International Group of P&I Clubs, which is based in London. West is one such club.

They collectively buy billions of dollars of reinsurance that would pay out in the event of a major disaster like an oil spill.

Some Russian cargoes are transferred between two vessels at sea before sailing to their destinations. Those instances could potentially see a western-covered tanker come into contact with one insured by Ingosstrakh.

In scenario where two such vessels collided and caused a spill, West might have to seek permission from the UK government to pay out, West said. That’s something that could potentially take a long time to obtain, or not be granted at all, it said.

Photograph of crude oil tanker; photo credit: Marcelo Del Pozo/Bloomberg Finance

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