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INSURANCE broker Aon has launched a new policy aimed at sectors for which fuel purchasing constitutes a significant cost, with major interest expected to come from shipping.

The new policy enables shipowners, operators and charterers to lock in an agreed price limit for bunker purchases – for as little as a few months or as long as five years – and which will pay out on a monthly basis if the price ceiling is exceeded.

The implementation of the IMO 2020 0.50% global sulphur cap was the catalyst for the development of the new insurance product. While the cost of lower sulphur fuels surged in early 2020, the impact of COVID-19 on global trade and energy demand saw a collapse in bunker prices across all grades.

There has been a price rebound since the low point of April and May last year, but further bunker price volatility is expected in the short term.

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The price of the insurance cover is determined on a number of variables. The first is based on the quantity of bunkers to be protected in terms of total fuel consumption – customers can also decide where to allocate cover on a per vessel or fleetwide basis.

The next is the price at which the insurance cover would be triggered. If the price limit is exceeded, claims are settled automatically on a monthly basis.

Policy purchasers will be able to pay premiums in full upfront or on a monthly basis, which could also assist with cashflow.

While premium costs will be variable, a broad-brush estimate puts them at about 1%-2% of a charter cost.

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