Owners face tougher insurance stipulations for Arctic routes - 22/08/2014

Insurers will be wary of large, high-profile losses in the Arctic, especially involving pollution.

Lack of data complicates risk pricing, Marsh warns

SHIPOWNERS wishing to use Arctic routes are likely to face tougher stipulations from insurers, ranging from sharply increased deductibles, extensive surveys and a requirement to carry spares, according to a study from Marsh.

The leading broker argues that a lack of statistical data for the region, which has only become navigable with the advent of climate change, significantly complicates the task of pricing risk, or even agreeing cover in the first place.

As a result, insurers will naturally be wary about the possibility of incurring large, high-profile losses, especially if they were to involve pollution in an area of such high environmental sensitivities.

While the St Lawrence Seaway will provide some precedent, the type of ice found on the US and Canadian inland waterway is seasonal, rather than multi-year or permanent ice, and therefore not completely analoguous.

Therefore, much risk management assistance will be required during the route’s infancy.

Although it is impossible to predict a timeline for the arrival of the Arctic as a mature market, significant development, led by the oil and gas industry, is expected.

As part of the process, new ports will emerge, possibly includingDikson and Katanga. But their activities will be focused on energy rather than containers or dry bulk.

This should help the development of the support services needed for Arctic shipping, such as salvage.

Marcus Baker, chairman of Marsh’s global marine practice, said that the crew competence could present a problem; even decades of experience in transiting the Suez Canal provides little guide to the challenges of the Arctic.

Senior vice-president Stephen Harris pointed out that much of the region had not yet been surveyed.

“We are not sure where the shallows are, but you’ll find out soon enough if you take a big ship through,” he quipped. “But that isn’t the recommended way of doing hydrography.”

in www.lloydslist.com 19/08/2014