Vladimir Putin, the President of Russia, emphasized the need to expedite the establishment of an independent insurance mechanism by the world's largest emerging economies at the recent BRICS summit held in New Delhi. This proposal is particularly relevant as BRICS countries seek to create an insurance capacity that is immune to Western sanctions and financial restrictions.
Proposal to Create a BRICS Insurance Company
Putin also urged BRICS members to develop payment and settlement infrastructures as well as an insurance mechanism and grain exchange. At this summit, the President of Iran, Masoud Pezeshkian, proposed the establishment of a BRICS insurance company with an initial capital of $10 billion, aimed at covering major infrastructure and energy projects.
Read more: Daily growth of vehicle scrapping to over 2,000 units by IDRO
BRICS members committed in the final declaration of the summit to explore the creation of a self-sufficient insurance ecosystem that can support trade and enhance the group's collective insurance capacity. This decision comes at a time when the marine insurance industry is increasingly affected by Western sanctions and geopolitical changes.
Current Challenges in the Marine Insurance Industry
Marine liability insurance is primarily held by the International Group of P&I Clubs. The aggregation system of this group dates back to 1899 when six British insurance clubs decided to share large losses. Currently, 12 clubs in this group provide liability coverage for about 87% of the world's marine tonnage.
However, this structure is increasingly facing geopolitical challenges. Western sanctions against Russia highlight the impact of insurance and insurance policies on maritime trade. On the other hand, wars in the Middle East have also exposed shipowners to sudden changes in capacity and war insurance prices.
Several emerging countries are developing alternatives to this traditional structure. For example, India established the "Bharat Marine Insurance Fund" this year, backed by a government guarantee of 129.8 billion rupees ($1.4 billion), providing coverage for hull and machinery, cargo, P&I, and war risks. New Delhi has explicitly pointed out the excessive reliance on coverage from the International Group of P&I and the risks posed by sanctions or geopolitical tensions.
Putin's proposal somewhat elevates this concept from a national level to a multinational level. Russia has been promoting the BRICS insurance structure for several years, and BRICS working groups have explored various models, including the establishment of an inter-country BRICS insurance company.
Read more: Government spokesperson provided explanations about the increase in commodity vouchers · Oil tanker carrying sanctioned oil cargo identified on October 17, 2023
