Japanese non-life insurance companies will raise premiums for LNG vessels operating in Russian territorial waters by about 80% starting Wednesday.
The move is in response to overseas reinsurers, which shoulder part of the insurance benefit payments, increasing their reinsurance premiums amid heightened geopolitical risks due to Russia's invasion of Ukraine. Shipping companies are likely to pass on higher transportation costs, which will make LNG more expensive for the Japanese importers.
Tokio Marine & Nichido Fire Insurance, Sompo Japan Insurance and Mitsui Sumitomo Insurance Co are likely increase insurance policy costs for damages caused to vessels to more than 20 million yen ($154,356.72) from the current roughly 12 million yen, according to Reuters report.
Japan imports just under 10% of the LNG produced at Sakhalin-2. To maintain LNG supply from the Sakhalin-2, Japanese companies have renewed their contracts with the Russian operator, post European sanctions. Japanese companies which renewed contracts to purchase Sakhalin-2 LNG include Osaka Gas, Jera Co., a joint venture between Tokyo Electric Power Company Holdings Inc. and Chubu Electric Power Co., and Tokyo Gas Co.