Improvements to vessel capabilities, support services key to future of Arctic navigation: Marsh

Arctic shipping routes offer the global maritime community an attractive alternative to existing trade routes – and are increasingly relevant to the oil and gas sector – but also present risks, suggests a report issued Tuesday by Marsh.

“While marine insurers are largely supportive of the development of Arctic shipping routes, they are extremely wary about incurring large, high-profile losses while the market is still in its infancy,” Marcus Baker, chairman of Marsh’s Global Marine Practice, notes in a statement from the global provider of insurance broking and risk management and wholly owned subsidiary of Marsh & McLennan Companies.

“Risk presentation is critical,” says Steve Harris, a senior vice president in Marsh’s Global Marine Practice. “Only if shipping firms can present insurers with the information they require, and all parties concerned take a collaborative approach to calculating these risks, will insurance capacity be readily available to support the growth in Arctic navigation.”

Marsh reports that to consider providing marine hull and protection and indemnity (P&I) insurance, insurers and P&I clubs require more detailed information about vessel capabilities and available salvage services, with wreck removal, pollution risks and crew health and safety of major concern to underwriters.

“Currently, the majority of ships and their crews lack adequate experience, are unprepared, and the support facilities are not yet in place for full-scale commercial voyages through the Northern Sea Route and the Northwest Passage,” Baker notes in the statement. “In the absence of hard facts, it is extremely difficult for marine insurers to price an insurable risk, or even to agree to cover a voyage in the first place,” he explains.

Arctic Shipping: Navigating the Risks and Opportunities notes that Arctic shipping routes, including the Northwest Passage, present the global maritime community with financially attractive alternatives on Europe to Asia trades through the Panama and Suez canals. These routes are becoming more relevant to the oil and gas sector, as energy exploration and production expands into the waters off the Russian Federation, northern Alaska, Canada and Greenland.

“The rapid development of fledgling Arctic shipping routes is dependent upon improvements in the capabilities of vessels navigating them and the upgrade and expansion of the support facilities in the region,” Marsh notes in the statement. Shipping firms will need to have a full understanding of the risks involved to gain the confidence of insurers, it adds.