Russian Oil Price Caps Raise Compliance Issues For Insurers
International Trade attorney Jonathan Epstein spoke to Law360 about how price caps on Russian oil are raising compliance issues for maritime insurers. The price caps, put in place by the European Union (EU) and the Group of Seven major industrial nations (G7), ban the purchase of seaborne crude oil from Russia that exceeds the $60-per-barrel price cap put in place on Dec. 5, 2022. Countries are enforcing the price cap by prohibiting maritime insurers from offering policy coverage to ships that carry products purchased above the price caps.
In September 2022, the U.S. Department of the Treasury advised that companies, including maritime insurers, who do not have direct access to pricing must request a “customer attestation” that the cost of oil was at or below the price cap. They also advised that insurers include sanction exclusion clauses in their policies. Ships found carrying Russian oil or petroleum products purchased above the price cap will be banned from receiving policy coverage.
"The attestation process was an intentional move by the G7 governments to create an environment where people would be comfortable continuing to trade Russian oil and not just say 'no, we're not going to do it, the risks are just too high,'" explained Mr. Epstein.
Previously, maritime insurers and protection and indemnity (P&I) clubs may have had limited compliance to sanctions exclusion clauses for their coverage, but according to guidance from the Treasury’s Office of Foreign Assets Control (OFAC) more due diligence is needed.
"They're clearly saying that while you, the insurer, don't have the duty to necessarily monitor the vessel constantly, you can't just rely on a clause," Mr. Epstein warned.