Marine insurance remains stable as geopolitics reshapes risk: IUMI

Opening IUMI’s annual conference in Rotterdam, president Frédéric Denèfle said hull and cargo premium income had continued to grow, supported in part by the weaker US dollar, while offshore energy remained comparatively subdued.

“The hull and cargo markets have shown growth in terms of premium income, although the offshore energy sector remains relatively subdued,” Denèfle (pictured) said.

“US trade tariffs haven’t caused the disruptions we feared, and the world economy was more resilient than anticipated. But there is considerable uncertainty from increasing war risks, additional capacity bringing greater competition and continued inflationary pressure.”

He stressed that uncertainty around free trade and global commerce remained an important consideration for the market.

Denèfle said marine insurers had continued to provide cover in higher-risk regions but would need to adapt as geopolitical tensions alter trading patterns.

“As insurers, we must be prepared to insure tomorrow’s trades and trade routes, including those being introduced to avoid areas of tension and conflict,” he said.

“We also need to understand the new markets that will inevitably emerge as a result of geopolitical developments.”

Denèfle also highlighted shipping decarbonisation as an area where insurers would need to remain closely involved.

“Insurers must take a leading position on the decarbonisation of shipping, despite the hiccups we have experienced so far on this journey,” he said.

Technology was another major theme, with Denèfle pointing to growing use of digitalisation, data standards and artificial intelligence.

“I see a day, not too far in the future, when our sector will be able to offer fully digitised and standardised global cargo insurance certificates that meet the requirements of financial institutions and our customers,” he said.

He added: “AI is going to change how we operate. It will make us smarter and more efficient, and we will need to embrace and adopt this new technology wholeheartedly.”

Despite the scale of change, Denèfle said the sector remained well positioned to respond.

“Despite all this change, our sector remains strong, agile and ready to adapt,” he added.

Marine insurers are war insurers

Marine insurers are playing an increasingly important role in managing war risks to global shipping as geopolitical tensions make cover more complex, according to IUMI.

Chairing the president’s workshop at IUMI’s Rotterdam event, Denèfle said insurers needed to continue developing tools that support global trade in increasingly challenging conditions.

“As marine insurers, we are at the very heart of the risk, and we must ensure that we continue to develop the optimum tools to support and facilitate global trade in all conditions, no matter how challenging,” he said.

Denèfle also sought to address what he described as a common misunderstanding around notices of cancellation.

“When a conflict situation arises, there is often a misunderstanding that cover is cancelled. This is not necessarily the case,” he said.

“When risk increases significantly, some insurers will serve a Notice of Cancellation in relation to the cover their assureds have in place. This enables the insurer to reassess the risk and then reinstate the cover on adjusted terms.”

War risk underwriting typically requires more detailed information than conventional marine cover, including the specific transit areas involved, time spent in high-risk zones and loading and discharge periods.

Denèfle warned insurers could not automatically rely on naval escorts or other state-backed protection being available for every voyage.

“Whilst this is hugely appreciated, insurers cannot completely rely on protection being available for every transit,” he said.

“The availability and reliability of such protection must also be taken into account when offering cover.”

He also highlighted the growing importance of CNED risks, covering confiscation, expropriation, nationalisation or dispossession.

“CNED risks in times of war are significant and can arise when states decide to take control or ownership of a vessel or its cargo,” Denèfle said.

“In general, cover is provided for a limited period in order to minimise exposure to CNED risks as far as possible.”

He concluded: “Cover for war risks is becoming more commonplace, and it is important for vessel and cargo owners to understand that insurers need much more information than ever before in order to create tailor-made contracts that deliver adequate protection.

“Global, blanket cover is simply not an option anymore.”