Insuring the Black Sea Grain Corridor
When the war brought grain exports to a standstill, (re)insurance was key to the solution
Ukraine is one of the world’s largest producers of grain, harvesting upward of 70 million tons of wheat, corn, and barley annually, which accounts for 10% to 15% of the world supply1, 2. When Russia invaded Ukraine in February 2022, grain exports came to a standstill – with potentially devastating consequences for the Ukrainian economy and far-reaching impacts on global food security. By May, grain prices had skyrocketed, hitting especially hard in areas where food availability was still suffering from the Covid-19 pandemic.
The UN quickly turned its attention to the question of how to restore Ukraine’s grain exports despite Russian blockades of ports. Finally, in July, the UN and Turkey were able to broker a deal between Ukraine and Russia that would allow for grain shipments to resume. By this time an estimated 22 million tons of grain was stuck in silos, waiting to be exported.
And yet, this grain couldn’t be transported without the backing of the (re)insurance industry. Under such circumstances, covering the shipments was much riskier than a typical cargo coverage policy and insurers’ eagerness to help was somewhat tempered by their caution.
Despite the fact that SCOR had never written Cargo War risks on a stand-alone basis, the team was determined to find a solution. Thanks to strong existing relationships and a willingness to collaborate with other industry players, SCOR UK was able to take a share in the insurance facility opened by Willis Towers Watson to provide Cargo and War risks cover for the transit of a number of these shipments. This required flexibility, reactivity, and close collaboration among Underwriting teams, Outward Reinsurance, Compliance, and Senior Management.
This prudent and measured approach has allowed Ukraine to resume grain exports and has helped to ease food shortages around the world, while also ensuring that SCOR and other (re)insurance stakeholders are not overexposed. The Grain Corridor Agreement is reviewed every 120 days and our policy terms are quoted by the Lead market on a shipment-by-shipment basis allowing flexibility should the local situation evolve. The deal brokered by the UN and Turkey, coupled with risk protection from (re)insurers like SCOR, has enabled 715 shipments, totaling 20 million tons of grain and other food products to be safely exported as of early 2023.
“The goal, of course, is to help facilitate this important scheme, with a well thought through risk approach,” says Mike Shillabeer, SCOR’s Cargo Underwriter for Specialty Insurance. “This is about us doing something for the greater good of the world and for me personally it’s something of a light in otherwise dark circumstances.”
Learn more about SCOR’s P&C solutions in the 2022 Activity Report in the sidebar.