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.

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.