forward are the ramifications of climate change. This impacts hull, cargo and offshore energy insurance.
Earlier this year, the IMO agreed a revised greenhouse gas reduction strategy calling on all vessels to reach net-zero as close to 2050 as possible. Achieving this requires a step-change in propulsion technologies and we are yet to see which will emerge as favourite. Regardless of which technology is adopted - and there is likely to be more than one – the industry will need to cooperate to ensure a comprehensive regulatory and safety regime is in place. Marine underwriters play a central role and IUMI is already involved in the safety roadmap currently underway at IMO. It’s the job of marine insurance to de-risk operations and so these new technologies will need to be thoroughly understood before they can be insured. At the same time, we are pushing for crew safety initiatives to be progressed alongside environmental imperatives and argue that the industry cannot have one without the other.
Aside from the vessels themselves, environmental pressures have also affected the type of cargo being carried. A topical example is the carriage of Lithium-ion (Li-ion) batteries and particularly those fitted in electric vehicles. Research shows that fires originating in electric vehicles are no more common that those started in traditional trucks and cars, and the energy and heat released from each fire is similar. However, the issue is that a Li-ion battery fire can result in thermal runaway where an unstable, internal chemical reaction will make the fire difficult to extinguish and cause it to continually reignite. This means that ships carrying these vehicles will need to adapt their fire-fighting capabilities and procedures accordingly. Similarly, marine underwriters will need to fully
understand this new risk and ensure the cover they offer is suitable. Loss prevention measures will also need to be updated and employed.
More fundamentally, it is the offshore energy sector that will be impacted most significantly by climate change measures. As peak oil comes closer, the growth in renewables is accelerating and this is translating into a massive uplift in floating wind capacity. Traditional oil and gas platforms are beginning to give-way to these new energy sources which, again, means a different type of risk for underwriters to understand and insure. Other offshore or sub- sea technologies starting to make themselves known to underwriters include carbon capture and storage, methane gas leak detection, and electrifying offshore platforms using renewable energy sources.
Earlier we discussed the low claims environment and the positive trend of a continual reduction in vessel losses. The anomaly to this is the growth in the number of onboard fires, particularly in containerships and car carriers. In past few years there have been on average three major cargo fires on containerships each year and statistics show that we are seeing, somewhere in the world, one fire each week in a container, in a container yard or onboard a vessel. Fires account for the most losses by value (around 18% between 2017 and 2021) and, tragically, they often result in loss of life.
The causes are complex but stem from the growth in vessel size. The largest containerships now carry 25 times more cargo than those built in the 1960s and due to modern stowage methods, access for fire- fighting crews is extremely limited. With the largest containerships now carrying up to 24,000 TEU, statistically there is a greater chance of a cargo within a box combusting and the
fire spreading. Unfortunately, the industry continues to struggle with cargo that is mis-declared resulting in some dangerous or hazardous goods being stowed in an unsuitable place, perhaps adjacent to highly combustible material. Onboard crews cannot effectively combat a blaze if they don’t know the nature of the material that is burning and so it is important that cargoes are accurately declared and stowed accordingly.
IUMI has been extremely vocal in recent years calling for changes to reduce these onboard fires including better firefighting capabilities and prevention measures.
On a macro level, political tensions are also impacting. The war in Ukraine has changed a number of traditional shipping routes and destinations which must be adequately covered. Vessels operating in, or close to, the war zone must be protected and this has led to specialist insurance and alliances of interested parties to do as much as they can to provide cover.
A sad corollary is that some vessel owners are choosing to break sanctions and lift Russian oil illegally. This is usually done in old and poorly maintained vessels with no recognised insurance cover. The problem here is the increased risk of one of those ships colliding with another vessel, or an oil spill impacting a coastal community, with no insurance cover to pick-up the bill. Our annual statistics are a unique indicator of how our industry is faring and it is safe to say that recent years have shown positive market development and improved loss ratios. This follows a number of less positive years. It is important for marine insurance to survive in a way that enables it to adapt to a changing world and remain an effective enabler of trade and a tool to de-risk shipping and offshore operations.
THE REPORT | DEC 2023 | ISSUE 106 | 127
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