Nearly every major trade route across the world has been or is at risk of being disrupted. 

Turbulence in the Red Sea has dominated the news in recent months. Houthi rebels have attacked merchant vessels travelling through the Red Sea. In response to these attacks, ships have been diverted via the Cape of Good Hope, which itself is a longer and costlier journey.  

According to Maersk forecasts, these diversions will result in a 20% reduction in vessel capacity between Asia and Europe. 

Meanwhile, in news that has  largely been ignored, the drought in the Panama Canal caused, in part, by low rainfall has resulted in the authorities restricting the number of vessels using this waterway. 

It would be tempting to regard such disruptions as mere “blips” and events to be managed before normality returns.  

Think again. In recent remarks reported by the Financial Times, the chief executive of Maersk believes that the current situation in the Red Sea will not be “short lived” and will “last at least into the second half of the year.” 

These comments should be heeded by marine (re)insurers, as the trade landscape is far from settling down and we are the entering the uncharted waters of what Russell describes as the “connected risk landscape”.   

Risks, whether they are geopolitical, as shown in the Red Sea, or environmental, as seen in the Panama Canal, or from the recent Baltimore bridge collision, have the potential to create cascading exposures to marine (re)insurers.  

In this evolving environment, (re)insurers need to develop sophisticated data analytics to move beyond just looking at their individual portfolios. They must have the ability to overlay their portfolios onto a system that logs the transit routes, company trade, port accumulations, ship movements and commodity flows.  

Only then will they understand true portfolio exposure from actual events and be able to implement proactive risk mitigation strategies to adjust accordingly to any new threats.