Since Western P&I clubs and reinsurers largely withdrew from underwriting sanctioned oil shipments, an informal and opaque re/insurance ecosystem has emerged to keep Russia’s shadow fleet trading.
What was once dominated by London and the International Group of P&I clubs is now sustained by a narrow set of domestic and offshore actors, state-backed reinsurance, and a tangle of ownership, flag, and registry manoeuvres that collectively substitute paper for market confidence.
For context, the Russian “shadow fleet” is a network of hundreds of vessels used to evade enforcement of the 2022 G7 and EU crude oil price cap sanctions, imposed in response to Russia’s invasion of Ukraine.
According to the KSE Institute, the analytical centre at the Kyiv School of Economics, a vessel is considered part of the shadow fleet if it has no service relationships with G7+ jurisdictions, which include the G7, the EU, and Australia, and transports Russian oil.
This definition aligns with that of Lloyd’s List, one of the world’s oldest continuously running shipping journals, providing weekly news from London since 1734.
“Russia’s response to oil-related sanctions is not novel, as Iran and Venezuela have reacted similarly to restrictions on their exports,” the KSE Institute noted in a 2024 report.
The KSE institute added, “So far, the challenge has not been addressed systematically. We aim to contribute to the conversation by discussing the origins of the shadow fleet’s environmental threat and proposing a mechanism to impose and enforce a requirement for adequate oil spill insurance. We argue that coastal states need to assert their authority to create ‘shadow-free zones’ in key areas.”
Since the sanction-driven pullback, a handful of Russian insurers have stepped into the gap, providing hull and liability cover, P&I-style services, or at least the documentation that allows ports and brokers to process voyages.
These domestic carriers, often reinsuring through a state-controlled vehicle, operate outside the international P&I framework that traditionally guarantees claims payments, pollution clean-up, and long-tail liabilities.
Policies in this market can be opaque, jurisdictionally constrained, and vulnerable to political or legal disruption in the event of a major accident.
Earlier this year, a coalition of Baltic Sea nations and the UK announced plans to inspect the insurance documents of vessels suspected of being part of Russia’s shadow fleet.
Authorities framed this as a way to crack down on unregistered ships without breaking regulations, since such vessels often operate without valid accident insurance or may present fraudulent or meaningless documentation to inspectors.
While some tankers appear to carry genuine domestic policies backed by Russia-linked reinsurers, others rely on ad hoc certificates issued through third countries or flagged to registries with low transparency.
For example, in 2023, Gabon reportedly more than doubled its ship registry, yet approximately 98% of its tankers are classified as high-risk, with no identifiable owners.
It has been widely reported that incidents involving these vessels are now occurring at an increased rate, including groundings, collisions, fires, and engine failures.
Recovering the costs of salvage and rescue operations is highly uncertain, given the lack of known ownership and the potential absence of insurance coverage.
According to multiple reports, many vessels in the shadow fleet are older and, as mentioned, operate under complex chains of beneficial ownership and shell companies, a commercial model that both reduces compliance scrutiny and increases the likelihood of underinsurance or disputed claims.
For regulators, coastal states, and cargo buyers, this creates acute legal and environmental exposure. Meanwhile, for the re/insurance market, the phenomenon raises structural questions.
As Reinsurance News understands it, this patchwork of coverage, state-linked reinsurance, and corporate opacity has kept Russian oil moving while exposing weaknesses in the global maritime liability system.
Policymakers and port authorities are responding by tightening document checks, requiring verifiable, international-standard P&I evidence for port entry, and scrutinising registry transfers and ownership changes more closely.
Just this week, for example, a Western-sanctioned vessel carrying Russian oil to Indian Oil Corp faced delays discharging its cargo at a port in eastern India due to a hold-up in online verification of insurance provided by a Russian insurer.
These measures increase friction for the shadow fleet but do not remove the underlying incentive to circumvent controls.
The industry’s challenge is to blunt tail risks without inadvertently driving liability further underground, a task that will require coordinated regulatory pressure, sharper due diligence, and, ultimately, alternative mechanisms to ensure that major pollution and liability risks are backed by enforceable, credible capital.
The shadow fleet does carry insurance, but through a markedly different market, one that is smaller, more politicised, and far less predictable than the international system it replaced.
The financial risks of this unpredictability are likely to be borne by third parties long before they affect the accounts of those who designed the workarounds.
While much attention has focused on insurance gaps and regulatory challenges, the shadow fleet also remains a direct target in the broader conflict.
In recent days, Ukraine struck two shadow fleet tankers off the Turkish coast, targeting vessels that help generate Russian oil revenues, which are crucial for funding its war in Ukraine.
