Venezuelan tanker seizures showcase Canadian shippers’ coverage needs

While the dramatic late-night capture of Venezuela’s president by U.S. military forces on Jan. 3 dominated headlines, it’s the ongoing boarding and seizure of tankers in the Pacific Ocean and Caribbean Sea, aimed at enforcing economic sanctions, that’s causing headaches for insurers.

And, based on U.S. policy documents, including the White House’s 2025 National Security Strategy, interventions in the region may not end any time soon.

The actions contain useful lessons for both Canadian shipping insurers and their clients, says an expert on the region.

“These recent events reinforce that marine insurance losses do not require physical damage to trigger potential losses,” says Marcos Alvarez, managing director for Global Financial Institution Ratings at Morningstar DBRS.

He notes vessel seizures, detentions or interdictions can all trigger claims under policies covering war-risk, loss of hire or political risk – presuming those coverages have been contracted. And, they can result in disputes in cases where coverage is limited by sanctions or exclusions.

“Dealing with sanctioned countries, companies, shippers and vessels add additional challenges even when operating under legal exceptions,” he tells Canadian Underwriter.

“Insurers need to have proper sanctions governance tools in place. The increasing numbers of vessels operating as part of the ‘dark fleet’ requires additional due diligence measures.”

Trade disruptions

Alvarez says events in Latin America, particularly those involving sanctions or maritime disruption, affect Canada mainly through trade and supply-chain channels, as opposed to direct exposure.

“Disruption to shipping routes or energy flows can increase transportation costs, delivery times, and price volatility for commodities and manufactured goods moving through the Americas,” he says. 

“Canadian companies doing business in [Latin America] and the Caribbean might consider adding political risk and supply-chain insurance as risk management tools.”

When responding to threats related to potential boarding or seizure, insurers and brokers must understand standard hull and cargo policies generally exclude war, seizure, arrest, restraint, and detainment of ships and their cargos.

“Where threats of boarding and seizure increase – such as in the Caribbean – war-risk endorsements or standalone war-risk policies become essential,” says Alvarez.

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“Loss of hire and delay-related covers also warrant closer attention. Even temporary boarding or detention can remove a vessel from service for weeks or months, generating significant revenue losses without physical damage.”

He adds political risk and confiscation coverages are important for incidents in which seizures are linked to state actions, rather than purely military events.

“This is particularly relevant for vessels, cargo, owners, or charterers operating near sanctioned jurisdictions,” he says.

Morningstar DBRS issued a commentary Jan. 8 addressing insurance risks in the Caribbean stemming from the U.S. actions in Venezuela. It offers broad perspective for the global industry but doesn’t address issues specific to Canada.

Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.