The Unity Facility insurance mechanism for grain transportation by Ukrainian sea corridor, announced in mid-November 2023, has been extended to ships carrying not only grain but any other cargoes from February 2024, Oliver Wyman partner Crispin Ellison said.
“By combining the efforts of the industry and the government, we’ve been able to create a mechanism (facility) where prices are well under half of those in the normal commercial market. And now, this month, February, we’ve expanded that facility to include transportation of all cargoes, not just grain,” he said at a Wednesday webinar on political risk insurance organized by the U.S.-Ukraine Business Council (USUBC) and the U.S. Department of Commerce.
He said this will be formally announced on Friday, but the option is already available and effectively triples the mechanism.
Ellison recalled that after Russia withdrew from the Black Sea Grain Initiative, insurance rates increased for the military risk element alone to about 5%, which was completely unaffordable and led to a halt in shipping in July and August.
Established using a public-private partnership (PPP) in which the Ukrainian government provided a $20 million reimbursement fund, the Unity Facility insures approximately 1,000 vessels per year with a maximum insured value of $50 million for each vessel, supporting the export of approximately 30 million tons of grain. The reimbursement fund is accessed through a letter of credit with Ukrainian banks and DZ Bank.
According to Ellison’s submission, a parallel mechanism for cargo coverage, supported by EBRD financing for the Ukrainian government, is being considered.
The expert emphasized that the relatively small amount of insurance capital allowed exporting goods worth about $20 billion, and its estimate is 6-8% of Ukraine’s GDP.
As reported, the Unity Facility was created with the support of the UK government, international reinsurance broker Marsh McLennan and over a dozen more British insurance companies.
According to the Ministry of Restoration, the sea corridor created by the Navy of the AFU and the Danube since August 2023 provided for the export of almost 26 million tons of cargo, of which more than 18 million tons – the products of Ukrainian agrarians. It was specified that from the ports of “Greater Odessa” 854 ships were sent to 42 countries.
