Maritime insurance in a changing world: Weathering the storms of global trade

08 May 20244 min reading

Jean-Patrick Caumont
Broker – Senior Account Executive

The global marine insurance market remains resilient despite facing numerous challenges in key trade routes such as the Red Sea and the Ukraine/Black Sea area. Despite ongoing disruptions and security concerns, insurance coverage has played a vital role in facilitating trade, particularly in regions affected by conflicts and geopolitical tensions.

In recent years, Ukraine has emerged as a significant player in global grain exports, contributing substantially to international food security. Despite the obstacles posed by Russia’s withdrawal from a UN-brokered deal and subsequent conflicts, Ukraine has managed to export approximately 14 million metric tons of grain through the Black Sea shipping corridor. This has been made possible through insurance coverage, stabilizing international agri-commodity prices and ensuring the flow of essential food products to global markets.

Affordable hull and cargo insurance products have been instrumental in supporting vessel and cargo owners operating in the grain trades both in the Black Sea, where Ukrainian main sea ports would never have been used without coverage and in the Red Sea region, where attacks and disruptions have been prevalent. Despite challenges such as attacks on Ukrainian port facilities or, on the other side of the Suez Canal, attacks on commercial vessels by Iran-backed Yemen’s Houthi rebels, insurance coverage has provided a safety net for maritime trade, albeit with adjustments to premiums and coverage terms to account for heightened risks.

The sinking of MV RUBYMAR loaded with fertilizers marked a pivotal moment for marine insurance, as it was the first time that not only the vessel’s hull but the cargo interests were directly impacted by such an event. Insurers consequently implemented stricter risk assessment criteria such as limitation of Israeli or US & UK interests in ownership and/or cargo interests and/or origins and/or destinations.

Increased collaboration among industry stakeholders has led to the establishment of standardized risk management protocols, including the requirement for ships to be nominated before entering high-risk zones to confirm the cargo cover, or not, depending on multiple factors analyzed prior to transiting. 

While piracy incidents in the region have risen, potentially capitalizing on the area’s disruption, they seem not directly linked to the Houthi attacks. Additionally, recent hijackings by Iran’s Revolutionary Guards, such as the MSC container ship with Israeli owners’ ties in the Strait of Hormuz, appear to be retaliatory actions against perceived opponents’ attacks on consulates.

Navigating from the Black Sea through the Red Sea presents a difficult challenge for exporters originating from these regions, as they face dual origin risks and transiting risks resulting in double additional war risk premiums. Insurers are working diligently to mitigate these costs, supporting global commerce and preserving at utmost the competitiveness of goods traded from these load ports. As a specialized marine insurance broker, Eyssautier-Verlingue consistently revises premium values and explores potential solutions to meet evolving needs.

The availability of affordable hull and cargo insurance products in the Red Sea ensures coverage for vessel owners amidst ongoing attacks and disruptions to global supply chains. Wars and conflicts inject uncertainty into the marine insurance market, impacting pricing and risk assessment. While maritime claims remain influenced by total trade volumes and ship traffic density, geopolitical tensions have led to increased compliance costs due to sanctions. However, despite challenges, insurers strive to maintain stability through financial strength and risk diversification. The marine insurance industry faces the escalating impacts of climate change, including extreme weather events.

The climate-related challenges facing the Panama Canal pose yet another significant issue for world logistics, particularly concerning the transit of essential commodities like containers including grains. Extensive delays and especially deadfreight issues caused by reduced water levels and other climate-related disruptions have disturbed the smooth flow of goods through this vital waterway. While parametric solutions may offer some relief by helping to mitigate losses incurred due to these deadfreight, they are not yet a comprehensive solution to the logistical challenges posed locally.

In addition to various regional challenges, global marine insurance premiums have experienced growth, driven by various other factors including supply chain issues, increased claims costs, increased service providers costs or legal fees. One knows that the fluctuation in marine insurance premiums is primarily driven by variations in claims, particularly evident during policy renewal periods.

Once again, Eyssautier-Verlingue stands as a reliable partner in finding the most efficient solutions, backed by the support of reputable insurance companies.

Looking ahead, the marine insurance sector must remain agile and responsive to evolving geopolitical dynamics, climate-related risks, and technological advancements.

In conclusion, amidst uncertainties and challenges, the resilience and adaptability of the marine insurance sector serve as a pillar of stability, safeguarding the interests of stakeholders and facilitating the flow of goods essential for global prosperity. As we navigate through turbulent waters, let us heed Churchill’s words “To improve is to change; to be perfect is to change often.” 

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