London’s marine insurance market announced recently that it has withdrawn maritime war-risk coverage for Venezuela (including Lake Maracaibo), as well as the nation’s “Exclusive Economic Zone,” which stretches up to 20 nautical miles off the South American country’s shores. The move comes after the Venezuelan government recently expropriated more than 300 service vessels and more than 70 gas processing units belonging to foreign companies, including Tidewater, Inc. and Exterran Holdings, Inc. Venezuelan law calls for compensation for expropriation in such circumstances and both companies have publicly indicated an intent to seek compensation.
The move represents the first time in some twenty years that a South American nation has been excluded from maritime war-risk coverage. Although the decision was made only by the London market, it may well affect other insurers’ approach to war-risk coverage for the area. It should be noted that the move does not block London underwriters from charging additional premium to reinstate coverage as to the affected area.