Special report: Insurance in times of crisis: Monitoring exposure and sanctions compliance in the Black Sea and beyond.
Concirrus has been monitoring exposure in the Black Sea and Sea of Azov in its blog on an ongoing basis. We sat down with James Whitlam, Data Strategist at Concirrus, to discuss the complexities of sanctions compliance and exposure monitoring in times of conflict.
1. The sanctions following Russia’s invasion of Ukraine have highlighted the complexity of monitoring sanctions compliance related to insured vessels with multiple new restrictions being imposed over the last month by numerous jurisdictions. What are the key considerations for insurers?
James: For insurers, situational awareness across their portfolio is paramount. This includes understanding where they have potential exposures in the obvious high-risk areas of the Black Sea and Sea of Azov, but also further across the globe where vessels could be receiving cargo that has been sourced from, or is associated to, sanctioned entities or individuals. Tracking these complex operational scenarios is challenging, but digital tools are increasingly being adopted to support compliance screening processes.
2. Are we seeing attempts to mask the original source of a commodity or even locations of vessels?
James: Sanctions compliance is a notoriously complex landscape to navigate in the marine insurance sector where cover is provided for assets that can move around the world, and that often have complex ownership structures sitting behind them. For example, vessels not wanting to be detected are able to turn off or even tamper with their AIS devices, the systems that allow their location to be tracked, meaning that third parties are sometimes unaware of their location and associated trading activity. Also, ship-to-ship transfers of oil products is a practice commonly seen in an attempt to mask the original source of a commodity. With the increasing pressure on Russia to sell these commodities that its economy depends on, ship-to-ship transfers is something that insurers are keen to keep on top of as the situation develops to ensure they are not unwittingly providing cover for these assets and therefore helping to facilitate sanctioned trades.
3. What are the current exposure trends you’re seeing in the Black Sea and Sea of Azov as the war in Ukraine enters its second month?
James: Hull sum insured values have fallen from approximately USD 11bn to roughly USD 8bn within the Black Sea and Sea of Azov region, with trading activity clearly being severely impacted in the northern regions closest to the conflict. The dynamic nature of the conflict has meant that numerous hotspots of exposure accumulations have been seen, which we are continuing to monitor.
4. How is technology helping insurers navigate the uncertainty in conflict areas?
James: The industry is becoming increasingly reliant on digital tools and predictive algorithms to track and predict exposures, something that Concirrus is actively involved with to support the transparent and responsible management of our customers' portfolios. A range of solutions are offered, from automatic identification of abnormal navigational behaviours, for example vessels visiting high risk regions outside of their usual trading areas, to automatic prediction and identification of potential ship-to-ship transfers. The application of complex monitoring solutions and predictive algorithms allows potentially sanctioned activity to be quickly identified, allowing insurers to perform highly targeted investigations into potential breaches.
The following analysis here highlights marine hull exposure concentrations as events in Ukraine unfold. The data on this page is updated each weekday.