This comes after Tokio Marine & Nichido Fire Insurance, Sompo Japan Insurance, and Mitsui Sumitomo Insurance announced last week that they would stop offering coverage for ship damage caused by the war in Russian waters due to reinsurers withdrawing coverage.
However, on Tuesday, a senior official at Japan's industry ministry stated that the government had requested insurers to take on additional risks to continue providing war insurance for LNG shippers. This decision was made to ensure that Japan could import fuel from the Sakhalin-2 gas and oil project in Russia's Far East during peak winter demand.
The insurance companies have reportedly negotiated with reinsurers to replace part of the coverage. It is expected that a total of 30 billion yen ($224 million) will be secured through negotiations with UK reinsurers. Domestic insurers will cover approximately 8 billion yen, while overseas reinsurers will take on around 22 billion yen. However, the underwriting capacity will be less than half of the previous 67 billion yen.
As a result, the number of ships that can be compensated at any one time is likely to be reduced to about half of what it used to be. This means that shipping companies may need to review their operations, according to a report in Nikkei. The industry sources confirmed the report and stated that the coverage will last until March.