Marine insurers and legal experts continue to grapple with unresolved challenges stemming from the Russia-Ukraine conflict, even two years after its outbreak. Burkhard Fischer, the 2023-24 chairman of the Association of Average Adjusters, addressed these issues during the body’s annual conference in London on May 9, 2024, highlighting the chaos the conflict brought to the maritime industry.
In his talk titled “When War Risk becomes War Reality,” Fischer delved into the implications for vessels trapped in Ukrainian ports and the complexities surrounding war risk insurance coverage. He emphasized that despite the name, war risk cover wasn’t initially designed to address the risks of actual warfare but rather to mitigate the lingering dangers from past conflicts, such as derelict mines and rusting weaponry.
The detention of numerous foreign-flagged vessels in Ukrainian ports in 2022 caught both vessel owners and war risk underwriters off guard. Fischer, also a director of Albatross Adjusters, Limassol, shed light on the unique challenges faced by insurers, particularly regarding vessels covered by basic war risk insurance at the time of port closures.
He discussed the concept of two premiums in war risk insurance: one for the entire period of insurance, known as basic war cover, and an additional premium for visits to high-risk areas. However, the situation in Ukraine raised questions about the application of insurance clauses, especially regarding vessels destroyed after cancellation but during a period of detainment.
Fischer highlighted the legal complexities surrounding charter parties, with cases like Scott v Copenhagen Reinsurance Co (2003) providing precedent for interpreting insurance coverage during wartime situations. He concluded that vessels detained in Ukraine at the outbreak of war would remain covered for certain claims even after the cessation of basic war risk cover, although coverage for other war risks would cease.
Addressing loss of earnings and total loss settlements, Fischer underscored the challenges faced by vessel owners and insurers alike. He raised concerns about vessels sold discreetly to cash buyers as part of total loss settlements, questioning the role of insurers in such transactions.
In conclusion, Fischer emphasized the need to treat each case individually, considering its unique circumstances amidst the broader geopolitical events. As the maritime industry continues to navigate the complexities of war risk insurance, clarity and adaptability remain paramount.
