Brokers and underwriters gathered in the historic Underwriting Room at Lloyd’s of London this week to celebrate the Queen’s Platinum Jubilee, by ringing the Lutine Bell twice – a symbol of the insurance market’s maritime roots which was traditionally struck once to mark a lost ship and twice for its safe return.

A different kind of peril now faces the age-old market after the UK and Brussels agreed to ban insurance on vessels carrying Russian oil as they tighten sanctions on Moscow for its invasion of Ukraine .

The move threatens to exclude one of the world’s largest crude oil producers from much of the maritime export market. Ships carrying Russian oil would rush to find alternative insurance, without which they risk being turned away from world ports.

Russia’s oil exports have largely held up despite Western sanctions on its financial system. Industry leaders say a coordinated insurance ban could change that and solve the fundamental problem with the EU maritime oil embargo: Russia can simply redirect its crude elsewhere.

“The impact of a UK and EU marine insurance ban on ships carrying Russian oil cannot be overstated,” said Leigh Hansson, sanctions partner at law firm Reed Smith. “We saw the impact of the Iranian oil insurance ban a decade ago, and it could well send Russian oil trade down the same path.”

It’s been a decade since Western governments first banned insurers from covering Iranian oil shipments, as well as imposing secondary sanctions on third parties who help Tehran evade sanctions, capping a broader set of measures and causing an almost immediate drop in exports.

But targeting Russia, the world’s third-largest oil producer, could have a much deeper impact on global energy markets.

Insurers are concerned about unintended consequences for the shipping industry and global commodity markets. As they try to make sure they don’t fall foul of the underwriting ban, they could overcompensate and take cover off a wider range of vessels.

“Because these cargoes move quite quickly and the insurance is taken out quite immediately, it’s quite difficult to do a lot of research into provenance,” a senior Lloyd’s official said. If this is not clear, insurers would “tend to take a slightly harder line by default”.

It could mean disruption to wider supply chains, including Kazakh oil shipped through Russian ports, as insurers take a cautious stance.

Industry insiders expect details on the measures in the coming days. The London market, which covers global risks, has been engaged in a furious lobbying effort since the start of the war to convince Western policymakers to align the timing and substance of their insurance sanctions.

With the ban on insuring or reinsuring Russian aircraft and space companies announced earlier this year, Western governments have announced policies in varying timeframes with different messages on their scope, triggering a market effort to establish an approach common.

Lloyd’s reiterated on Wednesday that it was “working closely with UK and international regulators and governments” to implement sanctions against Russia, noting that its “position as both market supervisor and insurer allows us to support various foreign policy objectives”.

Shipping industry figures believe an insurance ban would have a serious impact on the Russian oil industry.

“It’s very substantial,” said Dag Kilen, global head of research at Fearnleys, a shipbroker. “I would expect an immediate drop in Russian oil exports as the sanctions affect long-term contracts. This does not look good at all for Russian exports and the [domestic oil] industry in six to eight months.

One of the key areas of marine insurance is third party liability cover, which covers shipowners in the event of serious accidents such as oil or bunker fuel spills that can result in claims worth billions of dollars. dollars. Without such coverage, many ports refuse entry.

The maritime sector has its own special insurance arrangements through the International Group of P&I Clubs, 13 protection and indemnity insurers, most of which operate from Europe. They provide mutual insurance cover for 90% of ocean tonnage, pooling their risks, and rely on Lloyd’s for reinsurance cover.

Some P&I executives who spoke to the Financial Times said Iran’s oil experience would make it easier to comply with a Russian ban, but others see a Russian ban as adding to an already overwhelming compliance workload in due to other restrictions resulting from the conflict.

The EU has proposed a six-month phase-in period for the insurance ban, which could give Russia and interested parties time to sort through alternative cover in less-developed insurance markets such as India and China, and in Russia itself. Since the start of the conflict, Moscow has decided to strengthen the capacity of its public reinsurer.

In the case of Iran, Tokyo has begun offering sovereign guarantees to Japanese ships carrying Iranian oil. India has allowed ships to enter its ports covered by some Iranian insurers. Iran has its own P&I insurer, Kish, created as Western insurers withdrew.

Analysts, however, believe that the state-owned Russian, Indian and Chinese fleets are not large enough to handle all of the country’s oil exports on their own.

Some experts say shipping companies looking to transport Russian oil may find insurance capacity outside the UK and EU insufficient, while ports may not accept vessels covered by agreements outside the International Group of P&I Clubs.

Matthew Wright, cargo analyst at Kpler, said Russia would struggle to maintain the same level of oil exports when the ban comes into effect, but added: “There are still a lot of tanker owners who can operate under the radar. There are always loopholes and they will be exploited.