The operation to transfer over 1 million barrels of oil from the decay FSO safer in the Red Sea has reached an important milestone after obtaining insurance coverage for the operation.
The United Nations Development Program (UNDP) announced the mandatory insurance cover on Monday.
Obtaining insurance is described as a crucial milestone in advancing Ship-to-Ship (STS) transfers as it reduces the financial risk associated with operations for the various stakeholders involved.
“Insurance became a critical element in allowing this salvage operation to proceed,” said UNDP Administrator Achim Steiner. “Without them, the mission could not advance. UNDP has expanded and deepened its work with the global insurance community in recent years. This collaboration is having an impact in many ways.”
The FSO Safer, anchored just a few miles off the coast of Yemen, has been described as an environmental and humanitarian time bomb. Originally built in 1976 and later converted into a floating oil storage and offloading facility (FSO), the ship is loaded with approximately 1.14 million barrels of light crude oil. Unloading and maintenance were suspended in 2015 after the start of the war in Yemen, putting the ship at serious risk of breaking up and spilling its contents into the Red Sea.
The United Nations has warned that a major oil spill would devastate fishing communities on Yemen’s Red Sea coast and immediately affect the livelihoods of about 200,000 people. The cost of the cleanup alone is estimated at $20 billion, while disruption to shipping through the Bab al-Mandab strait to the Suez Canal could cost billions more in global trade losses every day.
To make matters worse, the situation is even more complex FSO safer is located in waters classified as “high risk” by the Joint War Committee in London, which sets insurance premiums and exclusions for maritime warfare insurers worldwide.
The process of removing oil from the FSO safer involves transhipment of the oil onto a UN-owned VLCC tanker and its scrapping safer in a junkyard.
After two years of groundwork and fundraising led by UNDP, a SMIT rescue team arrived on the scene last month to prepare for the disaster FSO safer for STS operation. the tanker, Nauticalis ready in Djibouti and is expected to travel to the site later this month to receive the oil.
According to the UNDP, more than 100 individual insurers were involved in issuing the highly specialized policies FSO safer, the STS operation and the replacement ship. Global insurance broker Howden, who was appointed UNDP broker, packaged, structured and syndicated the various risks of thirteen insurers in the Lloyd’s, London and P&I markets.
“Partnering with the insurance industry to mitigate risk FSO safer The operation is very visible evidence of UNDP’s leadership in using risk-sharing techniques to secure the SDGs in the most challenging contexts,” said Jan Kellett, Head of the Insurance and Risk Finance Facility (IRFF). “However, more is needed. As the most recent Human Development Report pointed out, action focused on “investment, insurance and innovation” is needed to enable people to thrive in the face of unprecedented uncertainty. That is why UNDP is investing in the long-term transformation of insurance markets to benefit vulnerable communities and ecosystems.”