The importance of maritime insurance is emphasized by incidents such as the blocking of the Suez Canal by the vessel Ever Given a few years ago, which paralyzed logistics all over the world. The canal was blocked for ten days, and the bill for that claim amounted to around 600 million dollars, which had to be split equally between the vessels and the cargo. Settling such a claim is a lengthy and complex process that can take many years. Without maritime insurance, cargo or container owners would need to sign an average bond or put up an average guarantee before they could get their cargo or container released from the shipping company.
Maritime insurance, the oldest type of insurance, differs from traditional insurances. It is international by nature, based on a multitude of underlying contracts often governed by foreign law systems or international conventions. Goods are purchased from a foreign company, transported to the port of shipment in a truck or railway car, loaded onto a vessel, and then sailed to the port of destination. Upon arrival, the cargo is unloaded and stored in a port warehouse, awaiting delivery to the final destination. Many parties are involved in the journey from grain to bread. Each party must be covered and insured to ensure the correct and timely delivery of the goods.
Every company in the logistical supply chain needs to assess what level of risk they want to incur. This includes both physical risks as well as contractual and financial risks. Companies engaged in transport and international trade are particularly concerned about their operational trade flows and their continuity as a company. The higher the stakes, the larger the concerns. Most companies are concerned about situations where various interests may be threatened at the same time, such as natural catastrophes like an earthquake, an explosion in a port, a terrorist or warlike attack, or a cyberattack.
Belgium has a unique position within the maritime insurance market, mainly thanks to the Port of Antwerp-Bruges. This Belgian industry is the twelfth largest in the world and has developed its own set of conditions and a whole apparatus of experienced lawyers, surveyors, maritime insurance agents, brokers, and also courts who are very familiar with the concepts of maritime insurance. All actors have a worldwide network of representatives to assist in solving local claims and complying with local insurance obligations.
The maritime transport sector is steering towards sustainability, influenced by the EU’s ambition for carbon neutrality by 2050. This shift impacts maritime insurance, as it must adapt to cover emerging green technologies and comply with stringent environmental regulations. Insurers are now less inclined to cover fossil fuels, while alternative fuels like LNG, methanol, and hydrogen are gaining traction, with Belgium leading innovations in hydrogen-powered shipping.
To compensate and avoid unfair competition, importers of goods into the EU will also be taxed to compensate for emission heavy imports according to the CBAM regulation. Importers of certain products such as cocoa will need to demonstrate that the goods they are importing have not been sourced from land that has been deforested.
Maritime insurers are incorporating these changes into their actuarial models, assessing emissions, and adjusting policies and premiums to reflect the risks associated with new sustainable technologies. They play a crucial part in ensuring regulatory compliance and transparency in taxation related to product transportation distances.
Innovative technologies bring about new types of risks. For instance the augmented fire risk caused by transporting electrical batteries in cars by sea. There are also many other factors that currently impact the maritime industry and thus their insurance needs:
- Inland shipping: the industry is witnessing a shift towards more professionally run companies entering the market. This change is accompanied by substantial investments aimed at promoting a modal shift towards inland shipping and encouraging the use of more eco-friendly propulsion systems.
- Technological advancements: older vessels are being replaced by newer, better quality ones. The fleet now includes inland vessels equipped with electrical battery power packs and hybrid propulsion systems. Also the use of semi-autonomous shipping, where ships are steered by a captain in a remote control room, gains in importance.
- Geopolitical impact: maritime insurance is strongly affected by geopolitical conflicts, such as those in Ukraine and Gaza. These conflicts often target international trade as a weapon, leading to disruptions in trade flows. Rerouting vessels and economic trade sanctions are common consequences. Safety measurements are therefore increasingly important.
Maritime insurance will continue to evolve constantly, along with the complex legal and financial environment. Clients will benefit more than ever from specialist maritime insurance consultancy in order to better evaluate their risks and try to prevent or mitigate them.
