remains total trade volumes, density of ship traffic in busy areas, as well as the speed applied, both literally and in decision- making, in the competition for freight. Maritime claims thus ebb and flow over time with a degree of randomness, especially as concerns large incidents and claims. Having financial strength and risk diversification as an insurer to withstand this volatility is key to ensure premium stability and predictability, which remains a key value proposition to members and clients.
Still, wars and geopolitical tensions have a direct impact on marine insurance through sanctions and insurers have been forced to invest heavily in compliance. However, to complicate matters further, sanctions are not universally imposed. Countries such as China and India continue to import significant quantities of oil and gas from Russia, facilitated by a so- called ‘parallel’ tanker fleet – often with limited or unknown insurance, leaving the environment and society at higher risk.
What to expect going forward?
So, what can we expect as an industry looking ahead? The old saying is apt: “It is hard to predict, especially about the future!”. However, there are some pretty clear signals on the radar.
Claims costs will remain volatile
Inflation continues to be high. Maritime claims handlers need to have a high focus on cost exposure, and the ‘swing factor’ between best and worst-case outcomes. Use of lawyers, experts, and specialist contractors is an investment to achieve a better claims outcome. For high-severity cases, the daily burn cost needs to be considered while for more routine claims handling costs must not become disproportionate. It takes vigilant, competent and confident claims handlers to identify mitigation opportunities: In a recent loss of hire case, the handler managed to source a much speedier propellor shaft repair, leading to valuable saving of time.
Increasing severity and complexity of claims
A relatively benign claims period should not be projected as the new norm. Looking ahead, we should expect cases of higher severity and increased complexity. More sophisticated and valuable assets make for higher loss exposures – both for vessels and fixed structures at sea and waterfronts. Ocean wind farms are growing in number and size. Together with other offshore surface and sub-sea structures they occupy more space in increasingly crowded offshore waters. Compensation demands in
liability claims are increasing, both for environmental damage and personal injuries (especially in the United States). Moreover, we see authorities in some states issue very large and wholly disproportionate fines against shipowners to boost compensation beyond available levels under international regimes. Add criminalization of both seafarers and shipowners, and it all makes for more adversarial, protracted, and expensive litigation.
In sum, we can expect more complexity in claims. As one response, marine insurers should continue to invest in outreach activities with a view to establishing trust and understanding with maritime authorities and other key stakeholders. Building trusting relationships before an accident happens can make a significant difference. Gard invests a lot in its global outreach program, specifically for this purpose.
Improved loss prevention
As technology, digitalization, and artificial intelligence (AI) continues to develop, we expect much enhanced opportunities for improved loss prevention services. This is especially important when considering how long it can take to amend regulations in relation to changing risks. Shipboard fires, often originating in cargoes, continue to buck the
THE REPORT | MAR 2024 | ISSUE 107 | 81
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