Ship insurance ban would drop Russian oil exports

Plans by the EU and the UK to block shipping insurance for any tanker used to carry Russian oil would severely limit Russia's ability to export its oil, according to maritime sources.

The insurance bans "alongside the EU oil embargo means that Russia's ability to export oil anywhere in the world will be heavily disrupted," said US law firm Reed Smith, which specializes in transportation.

Given European insurers' dominant position in the marine insurance market, such bans would potentially remove all vessels covered by the International Group of P&I (protection and indemnity) clubs, which account for about 90pc of the global shipping fleet, said Poten, a shipbroker.

"The potential implications [of these bans] cannot be overstated," said Poten.

A ban might force Russia and its major importers China and India to use domestic tanker fleets to carry Russian oil. Finding such vessels and arranging their insurance "could be very challenging," according to the shipbroker.

But even if such ships could be used for Russian oil there is still a possibility that ports would may not accept tankers without coverage from the International Group of P&I clubs, according to Reed Smith.

Any ship insurance ban would likely be implemented over time, "but even with six months of advance warning, we expect that Russia will have to cut its exports dramatically," said Poten.

By Nicholas Watt