Bad news for Russia, good news for your weekly pasta shop.
The Ukrainian government struck a deal with major insurers on Wednesday to provide affordable insurance to ships carrying grain out of the country. Up until this summer, Russia had agreed to allow shipments to sail out of Ukraine unmolested, but it severed that agreement, making insurers sweat bullets at the idea of covering shipping routes that were being actively targeted.
Ukraine is a major global exporter of crops including sunflower oil, wheat, and corn. According to Bloomberg, Ukraine exported one-third of the world’s corn last year behind Brazil and the US — and that’s despite the logistical nuisances that come with fighting off a Russian invasion. In July 2022, after five months of food prices spiking globally, Turkey and the UN brokered an agreement between Ukraine and Russia to let cargo ships sail down a specific path in the Black Sea without fear of Russian attack.
This past July, however, Russia declared that agreement over and launched a series of strikes against key Ukrainian ports. This meant Ukraine’s maximum export capacity dipped by up to 50%, and insurance became more expensive. Insurance rates reportedly rose sharply again just this month, after Russia hit a civilian vessel near Odessa with a missile. With the new deal, Ukraine hopes to bring those prices down:
- Ukraine’s Deputy Prime Minister Yulia Svyridenko told the Financial Times the new alliance between Ukraine’s government and insurers should bring the cost of grain insurance down by 2.5%.
- The insurers aren’t assuming all the risk in the way they normally would — Ukraine’s government is going to cover an undisclosed amount.
We Will Fight Them on the Premiums: Ukraine is also reaching out to allied countries for help in bringing down its insurance costs — or even just to get any insurance at all. Ukraine announced Tuesday it had struck a deal with the UK to get insurance discounts for Black Sea exports. It takes a real buddy to go to bat for you against the forces of insurance black-box premium calculations.