China takes lessons from Russia, out to fix maritime insurance ‘weakness’ after Ukraine war

China has monitored Western sanctions on Russia closely over the past year, with Beijing fearing similar punishment in any future confrontation and stepping up efforts to eliminate potential choke points.

A price cap imposed on Russian seaborne oil exports by the Group of 7 (G7) – the world’s seven major advanced economies – and the European Union in December sounded another alarm for trade-reliant China because it banned companies based in G7 countries from providing financial services such as insurance for cargoes in breach of the cap.

It could affect most oil cargoes originating in Russia, including those bound for destinations outside the G7 and EU, because protection and indemnity insurance – coverage that is indispensable on all international shipping routes – is dominated by organisations based in Europe.

Four of the G7’s member states are European – France, Germany, Italy and the United Kingdom – with the others being Canada, Japan and the United States.

“China definitely views maritime insurance as a weakness, especially after sanctions on Russia,” said Karim Moukhtar ElGalad, a Hong Kong-based trade and traffic manager at Maersk, one of the world’s biggest shipping companies.

“Therefore, it is strategically important for China to have Chinese insurance institutions providing maritime insurance on a global or regional scale to make sure maritime transportation cannot be affected by sanctions from other countries like what happened with Russia.”

Developing a Chinese shipping insurance sector has been on Beijing’s agenda for decades, with the authorities recently eyeing the Guangdong-Hong Kong-Macau Greater Bay Area as an incubator, but industry insiders said there was still a big question mark over whether the country’s financial sector could accommodate such an ambition.