Rising Risks, Rerouted Ships: The marine insurance industry is entering a period of profound transformation as geopolitical tensions, evolving trade routes, and emerging risks challenge traditional practices, according to industry leaders at the International Union of Marine Insurance (IUMI) conference held recently in Singapore.
Frédéric Denèfle, President of IUMI, warned that the sector is approaching what he terms the “end of globalization.” While global trade is not disappearing, it is undergoing a fundamental shift, reshaping risk assessment, underwriting, and operational strategies for insurers worldwide.
The End of Globalization and Its Impact on Marine Insurance
IUMI President Frédéric Denèfle opened the conference by highlighting the profound structural changes confronting marine insurers. He stated that the post-COVID world has accelerated the fragmentation of global trade, with regional conflicts and political tensions playing a major role in disrupting traditional shipping and logistics systems.
- Conflicts in Ukraine/Russia and the Red Sea are key examples of geopolitical instability affecting global commerce.
- Increasingly, national interests are taking precedence over international cooperation and global integration.
- As a result, vessels are being rerouted to avoid high-risk zones, leading to longer journeys and rising operational costs.
Denèfle emphasized that international trade isn’t ending but is transforming. Fragmentation is now the dominant trend, compelling insurers to rethink risk assessment, underwriting practices, and innovation strategies.
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Evolving Risks and Market Pressures in Marine Insurance
Several emerging risk factors are currently reshaping the marine insurance market:
Aging Global Fleet
- More than half of all marine casualties in 2024 involved vessels over 20 years old.
- Between 2018 and 2024, casualty incidents increased by 42%, reflecting aging fleets and operational challenges.
- High-value claims are rising sharply, with 17 Pool claims exceeding $10 million reported in 2024 alone, and total costs tripling compared to the previous two years.
Fire Incidents on Car Carriers
- The rise in fires aboard car carriers, especially those transporting electric vehicles (EVs), is a growing concern.
- Lithium-ion batteries present unique hazards in densely packed carriers, complicating claims and risk management.
Conflict-Driven Risk Premiums
- Due to the ongoing Red Sea conflict, war risk premiums have surged to 1% of a ship’s value, up from 0.4% earlier in the year.
- For a vessel valued at $100 million, the premium now amounts to $1 million, impacting profitability and driving rerouted shipments.
Technology and Innovation as a Strategic Response
Denèfle also pointed out how marine insurers are turning to artificial intelligence (AI), alternative trade corridors, and emerging markets to navigate this new era.
- Predictive analytics and smarter risk models are helping underwriters better assess emerging hazards.
- Investments in digital infrastructure and AI-driven claims handling are improving operational efficiency.
- Nearshoring and increased reliance on inland transport are shifting the dynamics of global logistics.
Resilience Amid Change
Despite these challenges, the marine insurance industry remains financially stable, according to Denèfle.
- Financial ratings of insurers are robust.
- Trust in insurers is high, supported by long-standing industry practices of adapting to shifting environments.
However, Denèfle cautioned that a sharp downturn in international trade could affect premium volumes and may require reassessment of underwriting strategies and business models.
“The beginning of a new era requires full understanding of these shifts, embracing innovation, and continuing to build resilience into everything we do,” he concluded.
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Conclusion
The marine insurance sector is at a pivotal crossroads. As geopolitical tensions, aging fleets, and emerging technology risks challenge traditional models, the industry is forced to adapt quickly. The combination of rising war risk premiums, complex cargo types (such as EVs), and restructured supply chains underscores a rapidly evolving risk landscape.
Industry leaders agree that while this period presents new threats, it also offers opportunities for innovation, smarter risk modeling, and sustainable growth. Insurers that embrace digital transformation and proactive underwriting strategies will likely lead the sector’s future resilience.
This isn’t the end of global trade—it’s the start of a fundamentally different and more complex era for marine insurance.
FAQ Section
1. What is driving the transformation in the marine insurance industry?
Geopolitical tensions (e.g., Ukraine/Russia conflict, Red Sea conflict), rising war risk premiums, aging fleets, and the emergence of unique cargo risks like EV fires are driving a shift from globalization toward fragmentation of trade.
2. How are marine insurers adapting to new challenges?
Insurers are adopting AI-driven risk models, exploring alternative trade corridors, and enhancing digital claims management to better assess risks, improve underwriting practices, and offer more tailored coverage in a volatile environment.
3. Why are war risk premiums increasing sharply?
Ongoing conflicts, especially in the Red Sea, have raised war risk premiums from 0.4% to as high as 1% of a vessel’s value, reflecting the elevated threat level and insurers’ need to cover potential losses.
4. What is the significance of the aging fleet issue?
More than half of marine casualties in 2024 involved vessels over 20 years old, contributing to a 42% rise in incidents since 2018. Aging ships face greater mechanical risks, leading to more high-value claims and stricter underwriting requirements.
5. Is the marine insurance market stable despite these challenges?
Yes, according to IUMI president Frédéric Denèfle, financial ratings are strong, and trust in insurers remains high. However, market participants must innovate and rethink business models to maintain resilience in this new era.
