Considering the future: Marine insurance in a world that is getting more unstable
Considering Synonym: Unstable Year 2022
The year 2022 was marked by rising geopolitical tensions, war in Europe, and growing indications of a world becoming more divided. Regretfully, 2023 has brought with it more tragedies.
The world’s attention was diverted from the ongoing war in Ukraine to another horrific conflict on October 7, when Hamas attacked Israel with great force and then launched a massive retaliation in Gaza.
Negative possibilities include heightened tensions in the South China Sea and a potential regional escalation in the Middle East.
A more divided world has an impact on shipping, international trade, and marine insurance. The latter is the main topic of this article, along with predictions for the future from the crystal ball and how marine insurance is doing in 2023.
consequences for marine insurance
Future developments are now more uncertain as a result of wars and conflicts. Real goods and capital prices have gone up, and inflation has lasted longer than anticipated.
Still, the global economy is expanding, and the majority of the shipping and trade markets are still strong.
Contrary to popular belief, war and geopolitical tensions do not always result in an increase in maritime claims.
The clear exception to this rule is war risk claims, as demonstrated by recent attacks on ships connected to Israel.
The overall volume of trade, the density of ship traffic in crowded areas, and the speed at which decisions are made in the competition for freight continue to be the primary causes of maritime accidents. As a result, maritime claims fluctuate over time to some
of chance, particularly when it comes to significant occurrences and allegations. To maintain premium stability and predictability—which continues to be a crucial value proposition for members and clients—an insurer must have the financial stability and risk diversification necessary to withstand this volatility.
What’s to come in the future?
What then can we anticipate as an industry going forward? It is true what they say when they say, “It is hard to predict, especially about the future!” On the radar, there are a few fairly distinct signals, though.
The cost of claims will continue to fluctuate.
The rate of inflation is still high. Handlers of maritime claims must pay close attention to cost exposure and the “swing factor” that separates the best-case scenario from the worst-case scenario. Using experts, attorneys, and specialized contractors is an investment that can be made to improve claims
result. The daily burn cost must be taken into account for high-severity cases, but handling costs for routine claims should not become out of proportion.
To find opportunities for mitigation, claims handlers need to be alert, capable, and self-assured: The handler recently found a much faster propeller shaft repair in a loss of hire case, which resulted in a significant time savings.
Growing in severity and intricacy of claims
It is not appropriate to project a comparatively benign claims period as the new standard. In the future, we should anticipate more complex and severe cases.
Higher loss exposures are associated with more valuable and sophisticated assets, which apply to waterfront properties as well as fixed structures at sea. The quantity and size of ocean wind farms are increasing. Along with additional offshore surface and
sub-sea structures are becoming more and more crowded in offshore waters. Demands for compensation in liability claims are rising, particularly in the US, for both personal injuries and environmental damage.
Furthermore, in order to promote better loss prevention, we see authorities in certain states levy extremely large and completely disproportionate fines against shipowners.
As digitalization, technology, and artificial intelligence (AI) advance, we anticipate significantly more opportunities for better loss prevention services. This is particularly crucial when taking into account how long it may take to change regulations in response to evolving risks.
Shipboard fires, which frequently start in cargo, persist despite improvements in maritime safety, and sensors are just one type of technology that can assist in identifying issues before they
Climate change and the shift to a greener economy
In the future, we should anticipate an increase in weather-related claims. Many insured assets can only be moved out of the path of extreme weather if adequate and consistent pre-warning is given.
Given the increased availability of forecast weather data, improved voyage planning that takes weather risks into account is anticipated.
An increased emphasis on seafarers
Sufficient and capable seafarers are essential to international trade. In addition to being essential in and of itself, crew safety and wellbeing will help to reduce operational risks on board.
Marine insurers should therefore give shipowner support in enhancing crew safety and well-being top priority. Covid made the difficulties faced by seafarers, such as mental health problems, widely visible. Although the pandemic has mostly subsided,
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