The global maritime sector is facing a series of unprecedented disruptions that pose challenges for business, consumers, insurers and governments, with the most potent of these threats arising in the Red Sea and Panama Canal.

Managing risk in a landscape where such disruptions are a dime-a-dozen is tricky to navigate at times, but the key to understanding events and potential exposures rests in monitoring transit route accumulation.

While an underwriter will typically monitor the exposure from companies within their insurance portfolios, they should monitor the exposure accumulation of company trade through key transit routes.

The reasoning behind this is that all companies import and export items through trade routes such as the Red Sea, meaning that in theory, the financial viability of these trades is predicated on these routes remaining open.

Businesses start to suffer delays the moment that these routes are closed or blocked which, in turn, has an impact on their profits. Many leading UK and European retailers have already delivered profit warnings this year because of difficulties in sourcing items caused by the Red Sea crisis.

Therefore, any exposure management solution for a marine (re)insurer that fails to quantify transit route accumulation is leaving their portfolios vulnerable to potential “blind spots of unknown exposure”.

Alternatively, by including transit route accumulation insights into their overall exposure management solution, a marine underwriter can turn an unknown risk into a more manageable risk, as the insurer would be able to estimate the potential exposure driven by an event of the worst-case scenario. This is a more proactive way of underwriting.

Taking such a proactive approach is a route to underwriting teams committing to, and delivering, a holistic solution that monitors global trade exposure by commodity, country, ship, port, journey and supply-chain at corporate or (re)insurer portfolio level.

Download a free copy of the Russell Group’s white paper on Transit Route Accumulation, which includes a foreword by IUMI President Frédéric Denèfle, here.