LONDON, March 1 (Reuters) - Insurance broker Marsh and Lloyd's of London underwriters have expanded a marine war insurance programme backed by Ukraine from grain shipments to all non-military cargo, such as iron ore and steel, Marsh said on Friday.

Marsh, Lloyd's and Ukrainian state banks launched an initial programme in November to cut the cost of claims for damage to ships and crew transporting grain through the Black Sea corridor, following Russia's invasion of Ukraine two years ago.

"Expanding insurance to cover ships carrying all non-military cargo is extremely important for Ukraine, especially in terms of exporting metallurgical products, as the full-scale invasion has heavily affected this sector," Yulia Svyrydenko, first deputy prime minister of Ukraine and minister of economy, said in a statement published by Marsh.

Ukrainian steel production contracted sharply in 2023 compared with 2021, and exports of metallurgical products fell "several times", Svyrydenko added.

The war risk insurance programme will also provide cover for other major Ukrainian exports such as electrical equipment and animal fodder, Marsh said.

Standby letters of credit from state-owned Ukrainian banks Ukreximbank and Ukrgasbank, each confirmed by Germany's DZ Bank, offer some compensation for losses to shipowners and charterers. The programme is backed by the Ukrainian government.

Lloyd's of London insurers led by Ascot underwrite the insurance, which provides $50 million of hull war risk cover and $50 million of protection and indemnity (P&I) insurance for every voyage.

Ships typically have P&I insurance, which covers third-party liability claims including environmental damage and injury. Separate hull and machinery policies cover vessels against physical damage.

War insurance rates have risen sharply in the region since the invasion.

The existing insurance programme for grain has cut war insurance premiums by more than half, Crispin Ellison, public sector partner at consultants Oliver Wyman, part of Marsh McLennan, told a media call.

However, the number of ships making use of the programme had only been in the "single digits", Marcus Baker, global head of marine at Marsh, told the call. The programme is also available via other Lloyd's brokers.

Ukraine also said in January that it was discussing war risk insurance for air transportation with Marsh.

Air traffic over Ukraine has been suspended since Russia's invasion in February 2022.

"We are looking at trying to develop a similar facility to allow the progressive opening of western Ukrainian air space," Ellison said, adding that the plans had some way to go as the risks were greater for aircraft than for ships.

There was also limited appetite among commercial insurers to provide cover for onshore Ukrainian businesses, he said. (Reporting by Carolyn Cohn Editing by Tommy Reggiori Wilkes, Tomasz Janowski, Philippa Fletcher)