State-owned Ukreximbank and Ukrgasbank, at the request of the Export Credit Agency, issued letters of credit for $10M each in favor of a pool of 14 British insurance companies to reduce the cost of insurance for ships moving through the Black Sea corridor.
It is noted that the mechanism of using letters of credit lowers the financial risks for British insurers, which allows for lower policy prices for shipowners. Thus, this practice makes the sea route more accessible to many exporters.
The mechanism was developed through cooperation between the Ukrainian and British governments to provide shipowners with the opportunity to obtain affordable insurance coverage for the transportation of grain and other goods exported from Ukraine by sea.
The need for this arose after Russia withdrew from the UN-brokered grain agreement in July 2023, which increased danger to ships and, therefore, the insurance cost.