The Lloyd’s List Podcast: The unintended consequences of sanctions

The Lloyd's List Telegram

Navigating the rapid escalation of sanctions has proved to be a steep and expensive learning curve for P&I clubs as they try to enforce the unenforceable. They now walk a precarious regulatory tightrope through the dark fleet, which now presents a global threat in terms of uninsured risk. But if you think this is just a problem for the insurers — think again

THE explosion of sanctions has demanded a compliance sea change from the marine insurance sector. But despite the rapid pace of investment to keep up, P&I Clubs have found themselves struggling to enforce an increasingly unenforceable regime.

The flawed nature of the oil price cap regime is hardly news. But while the rest of the industry gets to criticise from the sidelines, it is the P&I Clubs who have been left to walk a precarious regulatory tightrope.

The clubs have been politely telling government and industry for some time now that it is not for them to determine what should or should not be considered a lawful trade. And yet government and industry are increasingly looking to them for answers and enforcement they cannot provide.

This is not just a problem for the P&I Clubs to deal with alone. The main catalyst for the growth of the dark fleet is not so much ships removed from International Group Clubs then moving to less reputable insurers, although clearly that does happen.

Rather, it is because of the oil price cap regime that new operators are specifically establishing themselves with a corporate structure that does not rely on G7 coalition service providers at all. This puts them, perfectly legitimately, beyond the scope of the oil price cap sanctions.

That also typically means the use of low-quality flags and class, plus insurance that is probably illusory in the event of an incident.

Discussing the unintended consequences of sanctions on the podcast this week:

-Tony Paulson, head of Asia and corporate director at the West of England P&I Club

-Daniel Tadros, chief operating officer at the American Club

-Captain Rahul Khanna, global head marine risk consulting at Allianz