The Russia-Ukraine conflict carries the biggest safety and security threat to merchant shipping, according to a survey of insurance specialists by underwriter Canopius.
A whopping 96% of underwriters and insurance brokers from across the world who took part in the survey named the Black Sea region as an area of concern, followed by the Middle East Gulf and West Africa.
Geopolitical instability was alongside decarbonisation as the biggest current and future challenge faced by the shipping industry, the survey found.
Charles Fernandez, global head of marine at Canopius, said that the heightened geopolitical tensions and the threat of future conflicts had increased the importance of marine insurance to commercial shipping.
“Tension in the Taiwan Straits, open warfare in Gaza and the potential for conflict in the Persian Gulf, represent just some of the flash points which will test the marine insurance industry and its insurance partners. The role of insurance will be more critical,” he said.
Geopolitical tensions are already having a significant impact on trading patterns.
Insurers said their clients are now avoiding challenging regions, the survey revealed. Just under half had improved their insurance cover to account for the increased risk.
Shipping has been caught in the centre of Russia’s conflict with Ukraine from the outset.
Moscow has deliberately targeted Black Sea grain exports as part of its tactic to destabilise the country, said Maximillian Hess, a political risk analyst at Canopius.
He said a prolonged conflict remains in prospect in which shipping will continue to be caught in the crosshairs.
“The war is likely to continue through 2024 — with shipping in the Black Sea and potential contagion from the conflict into neighbouring countries, particularly Moldova and Belarus, remaining substantial risks throughout,” he said.
Canopius is addressing the increased importance of war risk cover to the shipping industry by developing an automated war risk insurance digital policy placement tool called ShipWRITE.
The system, which provides automated quote and bind functionalities, vessel tracking and quote and policy management, is now being trialled.
Canopius took on Nick Whitear in 2021 to develop its war risk business as a chief war risk underwriter.
Whitear said that the war risk insurance market has played a critical role in helping Ukraine reestablish its grain export business.
This happened firstly through the establishment of the now defunct United Nations Black Sea Grain Initiative and, more recently, a revival in exports through a humanitarian corridor running through the waters of Bulgaria and Romania.
Whitear estimated more than 100 ships have now sailed along the latest grain export corridor.
“The bravery of the mariners undertaking this journey should be remembered,” he said. “Drifting mines, missile and drone attacks are a constant threat.
“The insurance market can be proud of its role in supporting both these initiatives. The ingenuity and goodwill of our industry served the merchant shipping communities when it was needed most,” Whitear said.