A letter of credit (L/C) is expected to be a key component in a new framework designed to facilitate exports of Ukrainian grain around the world to those countries that need it most.

The framework is being established because since Russia pulled out of the UN- and Turkey-mediated grain deal and resumed attacks on cargo ships, the cost of insuring shipments leaving Ukraine via the Black Sea have spiralled to the extent that makes it near impossible to insure ships going in and out of the country's ports.

Public-private partnership

Professional services firm Marsh McLennan, including its insurance broker and risk advisory arm, Marsh, is working with Kyiv to provide services on a pro-bono basis to design and deliver a risk data platform that will allow insurers to assess and underwrite war risks in the country with greater confidence.

The framework would be a multinational public-private partnership based on the existing terrorism insurance pools that currently operate in several G7 nations.

L/C usage

Risk is expected to be shared between insurers and a local state-owned bank, which may provide an L/C as collateral.

The goal is anyhow to establish an L/C recognising that Ukraine and some of its lenders will be party to an agreement within the framework.

It would initially provide insurance against physical damage to ships, while cover for the shipments themselves may follow later.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.