Marine insurers as usual find themselves in the forefront of events, both at home and abroad. Due to the continuing Houthi attacks, Red Sea transits are down 50% with many ships choosing the longer route round South Africa. Whilst this is safer at one level, navigation around the Cape can never be taken lightly and there have been a number of heavy weather incidents with containers lost overboard.
More widely, there have been obvious economic consequences to the Egyptian economy and the Mediterranean ports. For some of this period, Panama Canal capacity was also down 50% due to drought. These two issues have added to chartering costs and that will, in time, feed through as higher prices to the consumer.
The world has enjoyed the peace dividend since the 1960s. This has been facilitated by containerisation and the evolution of the maritime supply chain based on a general acceptance of free trade. That rules-based order is now under strain from several directions including the rise of autocracies seeking regional influence and it seems clear that depending on the status quo is no longer a valid assumption.
Instead of just in time, countries are beginning to near shore and think about just in case. It is increasingly recognised that the exceptional efficiency of the supply chain honed by years of fine adjustments now needs to be backed up by redundancy in the form of spare capacity and stocks in order to better manage short and medium term interruptions.
No-one professes to want a world conflict so care is taken by politicians to limit escalation and limit involvement to avoid that outcome. To that end, sanctions have been a policy choice for a decade with regulators continuing to push for asymmetric control of trade via pressure on insurers. The overall effect has been to complicate transactions and to push business away from the dollar.
On top of that, there is the US challenge to its allies, demanding that Europeans take more defence responsibility and increase their spending. Future budgeting will need to prioritise deterrence over comfort or run the risks of not doing so.
On the sustainability side there is pressure on shipping to reduce its carbon footprint but options are mostly at the experimentation stage and there is little in the way of corresponding infrastructure. Insurers are also in focus and whilst supportive, will be anxious to understand the safety aspects of any new fuel selected.
At the same time, there is the issue of attracting people to sea. The entire world trading system depends on an assortment of 1.8m unregarded and often forgotten seafarers who are aging out. In the far east, there are reports that the average age of crews is 60 and rising and with that profile, more accidents are inevitable. Without doubt, a challenging year for marine underwriters lies ahead.
