Despite the price of Russian oil being capped at $60 per barrel by the Group of Seven (G7), several Western insurers continue to cover Russian crude cargoes.
American Club, West of England, and Gard are among the companies maintaining their coverage, facilitating the transport of oil from Russia to destinations in Asia, notably China.
The data show that Russian Urals crude, sold on average at $69.4 per barrel, is well above the ceiling.
However, insurers are not required to check prices directly.
They rely on certificates provided by traders and charterers confirming that oil is being sold below the imposed ceiling.
This situation enables Russia to continue exporting oil despite the restrictions.
Certification procedure and Reviews
The attestation mechanism on which insurers rely is criticized for its lack of transparency.
The International Group (IG) of P&I Clubs, which insures 90% of the world’s fleet, points out that this process can expose insurers to unintentional sanctions violations.
Indeed, the system does not require disclosure of the exact price paid for oil, making verification difficult.
Gard and other insurers say they would withdraw coverage if evidence came to light that certifications were inaccurate.
However, the lack of transparency in international oil transactions complicates the rigorous application of the price cap.
Despite the criticism, insurers say they are complying with existing regulations while meeting the business needs of their members.
Energy Sector Impacts and Opportunities
Continued coverage by Western insurers in this stringent regulatory environment raises questions about the effectiveness of economic sanctions.
The marine insurance sector, in particular, finds itself at the intersection of regulatory requirements and commercial imperatives.
Insurance companies have to navigate carefully to avoid sanctions while continuing to offer essential services to their customers.
This situation highlights the complexity of the international oil trade, and the need to strengthen control mechanisms to ensure compliance with regulations.
Industry players must remain vigilant and adaptable in the face of changing regulations and business practices.
