Analysis: European insurers fear sanctions coming down Nord Stream 2 pipe

A simmering threat of sanctions against the operator of the $11 billion Nord Stream 2 pipeline risks shutting off cover from European insurers for the politically-sensitive project to bring Russian gas directly to Germany

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12/2/2021 5:06:00 PM

A simmering threat of sanctions against the operator of the $11 billion Nord Stream 2 pipeline risks shutting off cover from Europ ean insurers for the politically-sensitive project to bring Russian gas directly to Germany

A simmering threat of sanctions against the operator of the $11 billion Nord Stream 2 pipeline risks shutting off cover from Europ ean insurers for the politically-sensitive project to bring Russian gas directly to Germany.

Gazprom declined to comment on Nord Stream's insurance.In the absence of European insurers, the project could use Russian entities, lawyers say. One Russian insurer Konstanta - now renamed RNCB Insurance - has already been sanctioned.RNCB Insurance did not immediately respond to request for comment.

SANCTION THREATEuropean insurers, such as those operating in the Lloyd's of London insurance market, could in theory underwrite the pipeline, its Chief Executive John Neal said."We've been involved with the Nord Stream project previously, certainly insuring its construction," Neal said, adding: "We need to be hugely respectful of sanctions."

Lloyd's of London declined to comment further.Munich Re CEO Joachim Wenning told Reuters it is not currently involved with Nord Stream 2 due to sanctions issues.Zurich said it did not comment on potential or existing customer relationships but stressed that it placed high priority on sanctions compliance. AXA declined to comment. headtopics.com

Allianz, Europe's biggest insurer, said it could not comment on client relationships, but a spokesperson said the German firm followed "all sanctions regimes very thoroughly".PIPELINE COVERWith construction complete, insurance for the pipeline itself would protect against problems such as property damage, business interruption and directors' and officers' liability.

But the delayed approval will likely slow arrangements, said Ross Denton, head of international trade at law firm Ashurst.One key risk is that the United States could extend sanctions to European firms at short notice, experts say.Nigel Kushner, chief executive of London law firm W Legal, says the U.S. has a reputation for using sanctions against tactics that aggravate NATO and the West.

"The reaction of the U.S. on almost every single occasion is to ramp up sanctions," he says."Who in their right minds will jump into something and finance something and provide support to something, because there is a risk they may be sanctioned?

"Insurers are prudent and I think they will be reticent."Register now for FREE unlimited access to reuters.comRegisterAdditional reporting by Tom Sims and Vera Eckert in Frankfurt, Simon Jessop in London, Katya Golubkova and Vladimir Soldatkin in Moscow and Timothy Gardner in Washington; Editing by Alexander Smith headtopics.com

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