Considering the series of, what appear to be, a never-ending amount of natural disasters, political and social issues, wars, and high inflation, an article by Gard, the world's largest specialized marine insurance group, looks back at 2023 and how marine insurance has been affected by these events, as well as what lies ahead. 

Mark Russel, head of cargo claims and large claims loss control at Gard, highlights the fact that global conflicts affect international trade and thus marine insurance, creating uncertainty about the future. 

However, "Perhaps contrary to popular belief, war, and geopolitical tensions do not necessarily lead to increased maritime claims (with the obvious exception of war risk claims, as recent attacks on ships linked to Israel have shown)."

The article indicates that the main factors in maritime accidents continue to be the total volume of trade, the density of maritime traffic in crowded areas, as well as the speed applied in both navigation and decision-making in the competition for the transport of goods.

Wars and geopolitical tensions have a direct impact on marine insurance through sanctions. To further complicate matters, countries such as China and India continue to import significant amounts of oil and gas from Russia, through a so-called "parallel" tanker fleet, often with limited insurance, leaving the environment and society at greater risk.

What to expect going forward?

Claims costs will remain volatile 

According to Gard, maritime claims managers should pay particular attention to cost exposure and the "swing factor" between best and worst-case scenarios. The use of specialized lawyers is an investment in achieving a better claims outcome. For high-severity cases, the day-to-day cost should be considered, while for more routine claims the handling costs should not become disproportionate.

Increasing complexity of claims

Going forward, cases of greater severity and complexity should be expected, as more sophisticated and valuable assets generate greater exposure to loss, both for vessels and for fixed structures at sea and offshore.

Compensation amounts in liability claims are increasing, both for environmental damage and personal injury (especially in the United States). Add to that the criminalization of both seafarers and shipowners, and it all adds up to more adversarial, protracted, and costly litigation.

In response, marine insurers should continue to invest in outreach activities to establish trust and understanding with maritime authorities and other key stakeholders.

The contribution of technology

As technology, digitization and artificial intelligence (AI) continue to develop, opportunities are expected to improve loss prevention services.

For example, in the case of lithium-ion battery-related fires, the use of sensors will be able to help. Digital twins can also run simulations to help with early intervention and AI is already being tested to support onboard decision making.

Another example is the geo-tagging of bulk carriers heading for hotspots known to mis-declare bulk cargoes prone to liquefaction.

In this way, technologies can proactively help shipowners manage risk, save lives, prevent environmental damage, and protect valuable assets.

Climate change and green transition

Looking ahead, more claims related to extreme weather conditions should be expected. Also, the transition to decarbonization and the current shift to cleaner fuels will accelerate, as will the need to understand the risks associated with this process: toxicity, fires, pollution, and contractual or legal disputes.

On the other hand, crews will need to improve their skills. In addition, aspects such as casualty management, ranging from salvage to pollution cleanup, will need to be adapted to the properties and risks of the fuels in question.

More attention on seafarers

International trade depends on sufficient and competent seafarers. Their safety and well-being are also crucial to mitigating the risks of ship operations. Therefore, helping shipowners to improve crew conditions should be a very high priority for marine insurers.

The pandemic brought to light the challenges of seafarers, including mental health issues. While it must be recognized that working and living on board a ship can never be without risk, Gard points to working with shipowners to mitigate such risks and universally strengthen the human rights of seafarers as an audible goal.