The United Nations Development Program (UNDP) announced this week the “successful binding of insurance coverage” for a mission coordinated by the United Nations “to prevent over a million barrels of oil spilling into the Red Sea”.

In a statement sent to Rigzone, the UNDP highlighted that the operation involves the transfer of the oil to a replacement vessel and the scrapping of the FSO Safer at a green salvage yard. The UNDP noted in the statement that the mission is highly complex and involves a range of environmental, geopolitical, financial, and humanitarian risks.

In the note, the UNDP outlined that, with support from its Insurance and Risk Finance Facility (IRFF), it was able to bind coverage “thanks to its deep, long-term collaboration with the insurance industry”. More than 100 individual underwriters have been involved in the issuance of an “exceptionally specialized” set of policies covering the FSO Safer, the ship-to-ship operation, and the replacement vessel, the organization highlighted in the statement.

Howden, which was appointed in open tender as the UNDP’s broker, packaged, structured, and syndicated the various risks across thirteen insurers in the Lloyd’s, London, and P&I markets, the UNDP revealed.

Securing insurance was described by the UNDP in the statement as a “pivotal milestone in enabling the ship-to-ship transfer operation”. Without insurers offering their balance sheets to underwrite the residual financial risk, the mission could not progress, the UNDP said.

“Insurance became a critical element of enabling this salvage operation to proceed – without it, the mission could not go forward,” UNDP Administrator Achim Steiner said in a UNDP statement.

“UNDP has been broadening and deepening its work with the global insurance community over recent years. That collaboration is delivering impact in many ways,” he added.

“We are especially grateful to Howden for facilitating this process with the insurance industry on this critical initiative to ensure that coverage has been secured in the most challenging of contexts,” Steiner continued.

Jan Kellett, the head of the IRFF, said, “the partnership with the insurance industry to de-risk the FSO Safer operation is a very visible demonstration of UNDP’s leadership in harnessing risk-sharing techniques to secure the SDGs in the most challenging of contexts”.

“However, more is needed. As the most recent edition of the Human Development Report emphasized, policies that focus on ‘investment, insurance and innovation’ are required to enable people to thrive in the face of unprecedented uncertainty,” he added.

“For this reason, UNDP is investing in the long-term transformation of insurance markets to the benefit of vulnerable communities and ecosystems,” he continued.

Race Against Time

In a segment on the UNDP website explaining the FSO Safer mission, Steiner states, “we are in a race against time, and I urge leaders in government, CEOs of corporations, and any individual in a position to contribute to step forward and support us in keeping this operation, that is fast reaching a critical stage, on track”.

In this segment, the UNDP highlights that the UN is “appealing for urgent support”. The organization points out in the segment that countries and other partners have pledged more than $100 million but notes that a “significant funding gap remains as close to $24 million more is needed to fully fund the emergency phase of the operation”.

In a separate statement posted on its site on May 4, the UNDP outlined that Egypt, France, Italy, Luxembourg, Malta, Norway, the Republic of Korea, the United Kingdom, and private company Octavia Energy and its subsidiary, Calvalley Petroleum, announced pledges totaling almost $8 million, of which $5.6 million represents new funding, at a UK/Netherlands online pledging event.

With that amount, the UN had raised $105.2 million for the emergency phase of the operation, the UNDP highlighted at the time. This leaves $23.8 million for the emergency phase unfunded, the UNDP said in the statement, adding that an additional $19 million is required for the “critical” second phase.

The second phase comprises the installation of a catenary anchor leg mooring buoy and the tethering of the replacement vessel to it, as well as the towing of the FSO Safer to a green salvage yard for recycling, the UNDP outlined in the statement.

‘Challenging’ Operation Starts

Last month, the UN announced that it has started the “challenging” operation to remove more than one million barrels of oil from the FSO Safer supertanker. In a statement sent to Rigzone in May, the UN noted that the salvage support vessel Ndeavor - which is operated by SMIT, a subsidiary of Boskalis, and contracted by the UNDP to undertake the transfer of the oil to another vessel - arrived onsite. The UN described the development as a “critical step forward in the operation”.

Back in April, Boskalis announced that, through its subsidiary SMIT Salvage, the company had reached an agreement with the UNDP for oil removal from the FSO Safer moored off Yemen’s Red Sea coast. In March, Euronav NV announced that it had signed an agreement with the UN to sell a Very Large Crude Carrier as part of a wider salvage operation for the FSO Safer.

In May last year, a joint statement from representatives of the U.S. and Netherlands governments described the FSO Safer as “a rapidly decaying and unstable supertanker” and warned that “it could leak, spill, or explode at any time”. 

To contact the author, email andreas.exarheas@rigzone.com