While the global transport industry maintained its long-term positive safety record in the past year, Russia’s invasion of Ukraine and subsequent cost increases involving large vessels, crew shortages, port congestion issues and the Suez canal obstruction, meant the industry did suffer overall, which impacted the marine transit insurance sector.
Russia and Ukraine’s Impact
Russia’s invasion of Ukraine has had multiple impacts on the shipping sector. These include the loss and destruction of vessels and stock transported in the Black Sea, causing increased sanctions and the overall disruption to goods in transit.
Because of the conflicts, insurance companies have suffered further losses through targeted cyber-attacks on the shipping industry, such as GPS jamming or Automatic Identification System (AIS spoofing) and electronic interference.
Sanctions are also applied to other parts of the transport supply chain, including banking and other maritime support services, causing further compliance complications for global companies and insurers.
Difficulty in Meeting Higher Demand
The high demand for shipping also has a direct impact on crew welfare and port congestion, which led to several safety issues. While there is a high demand for crew, many experienced and skilled seafarers left the industry following the COVID-19 interruptions. Within five years, a serious shortage of skilled workers is expected. As compliance duties, commercial pressures, and workloads are increasing, staff morale is low, causing an increase in human error.
The increase demand on shipping companies has also seen many owners increasing the vessel’s working life. Worryingly, the industry saw an increasing in the average age of vessels rose even before the pandemic. Although there are many well-managed vessels that are older than the average, insurance companies still noticed an increase in claims made due to corrosion and other machinery parts being vulnerable to breaking down.
Fires on Containerships
Fires on large containerships are another area in which insurers have suffered severe losses, with an increase in dangerous products being shipped in containers. For example, calcium hypochlorite, charcoal, and even lithium batteries have all been linked to causing fires in recent years. These incidents are largely also due to the cargo not being properly declared and improperly stowed.
The shipping industry is also under pressure to increase its environmental sustainability efforts. Green technology and other fuels will be required to help decarbonise. This will require large investments, with a number of vessels switching to liquefied natural gas (LNG), while alternative fuel solutions such as ammonia and hydrogen, are being developed. Ship owners will have to balance the pros and cons of different fuel types. Distillate oils, for example, have a lower risk of producing engine wear.
The insurance sector continues to be influenced by environmental regulations, opting to insure more environmentally friendly machinery, with less flammable oils.
In the coming years, cyber and climate change will be major drivers of maritime sector risk. While technology has many benefits, it can also have unexpected consequences. Cyber Insurers in the marine industry have seen an increase in claims due to human error, as well as ransomware attacks, spoofing, and other incidents that highlight the cyber threat to ports, shipping, and logistics companies. In order to assist insurers and protect Australian companies, the Government has announced a $10 billion package to help prevent cyber crime.
As a result of the pandemic, marine transport companies are likely to demand more coverage from their insurers. It will be essential that the insurance industry has a solid footing if it is to continue supporting the shipping industry over the next few years.
Although insurance claims have been rising, the long term marine transit insurance market will need to remain strong and hope for a positive year ahead.
How Trident Insurance Can Help
Like all insurance policies, marine insurance policies can be complicated. The insurance must cover matters of domestic and international maritime law, and other regulatory issues. It is important to consult an insurance professional when dealing with such complex marine risks.
Trident Insurance can help choose the right marine transit policy for you, whether you are looking for an individual or business policy. We will work closely together to understand your needs and help you find the policy that comprehensively protects your assets whilst in transit. For more information about this unique type of insurance, please contact us today. We are happy to answer all your questions.