The Marine Insurer Issue 17 - April 2024

The Marine Insurer

Globalcargorisks mountforinsurers

Sustainable growth challenges facing marine sector

l Geopolitics: War and sanctions continually evolving

l Polar Star: Final verdict from the courts

l North West Passage: Risk and opportunities

l Fuels: Maritime fuels changing fast

l Cargo: Trends driving claims

The 2024 event will once again take place at The Grand Hotel in Malahide, Dublin in 2024. This all-inclusive, three-day residential event will bring together the key players in the global marine insurance claims sector to discuss the market landscape and take an in-depth look at the challenges and opportunities that lie ahead for 2024 and beyond. Book now to avoid disappointment.

GLOBAL PARTNERS

Interconnectivity of risk inescapable

SADLY, there is little escape from war and the fall-out from a turbulent geopolitical environment.

In the last issue we were talking about the Isarel-Gaza conflict, following on from the almost two years of UkraineRussia conflict. That two year anniversary has passed with little sign of resolution and, on top of that, we now have an escalating situation in the Red Sea.

Houthi rebels and pirates are combining to make the crossing of the Gulf of Aden a treacherous undertaking once more. With almost daily reports of ships being attacked by the Houthi rebels who have openly stated they will target Israeli, US and UK interests (with little background checking on that it seems), many shipping lines have chosen to opt for the long route round the Cape.

This inevitably leads to further delays on already stretched supply chains, with consequences for customers and their insurers worldwide. So much political upheaval has led to some to question whether there is in fact a totally new world order emerging and what that might mean for the Global North. This conversation leads neatly into the drive for Net Zero. While the Global North is pushing for renewables and reduced carbon footprints, some of the Global South is still struggling to develop economies and provide the basics for their populations. That, to some extent, includes China and India who are using oil and gas as well as renewables to drive their economies forward. So where will the balance fall? And what does that mean for insurers? That is very much and wait and see question but one that strategists are already grappling with.

Back to the here and now and, as we explore in this issue, claims continue to be a pressing challenge for the insurance industry. Some of these land up in the courts so it is good to see the Supreme Court rule on The Polar Star – the industry has been waiting for a while for the decision in the hope it will give much needed clarity and, as it turns out, something that it particularly relevant as piracy in the Gulf of Aden hots up once more. All of this just goes to show the interconnectivity of risk, something that links all of the pieces in this month’s The Marine Insurer. Enjoy the read!

Keeping the engine of the world going

Steadman , Head of Marine Cargo, AXIS, delves into the complexities of accumulation risk and its effects on the global supply chain and marine cargo insurance industry

Operating within the intricate web of global trade is the marine cargo insurance market, providing essential coverage against the perils impacting goods in transit across land and sea.

Central to this market is the challenge of accumulation risk – monitoring the aggregation of potential losses arising from multiple marine cargo policies in one area or on board one vessel.

Understanding this risk is vital for insureds and insurers in the marine cargo industry to effectively manage and mitigate potential exposures.

VALUE CONCENTRATION

Accumulation risk in the marine cargo insurance market refers to

Helen

the concentration of insured values or exposures within specific geographical regions, trade routes, cargo types and vessels.

While insurers aim to spread risk globally to reduce potential loss exposure, accumulation risk is an increasing concern as the world becomes ever more interconnected and complex, through rising geo-political and macro-economic tensions, natural catastrophes, and supply chain dynamics.

The interconnected nature of global trade means that a single disruptive event can have cascading effects, amplifying the magnitude of losses for insurers and their insureds.

GEOGRAPHICAL CHALLENGES

One of the primary sources of accumulation risk in marine cargo insurance is geographical concentration.

Trade routes with high cargo volumes, such as major shipping lanes and ports, are highly susceptible to this type of risk due to the large number of vessels passing through at one time.

We saw this most vividly when the Ever Given lodged against the banks of the Suez Canal, blocking a busy shipping lane through which as many as 70 vessels pass every day and causing other ships to seek alternative routes.

Trade routes linking regions prone to geopolitical tensions pose additional challenges for insurers in times of heightened activity.

The threat of armed conflicts, piracy, or terrorism along these routes can lead to substantial losses if multiple insured cargoes are affected simultaneously.

One current example is the pressures in the Red Sea where vessels have an increased exposure to loss. Insurers must assess and price these risks, however doing so accurately is not straightforward because of a lack of realtime data and intelligence.

Adapting quickly to the shipping company’s decision to divert its route or continue through the zone of conflict can be another area of a challenge.

Natural catastrophe events, such as major storms or earthquakes, can increase an insurer’s susceptibility to accumulation risk even further.

The interconnectedness of global supply chains means that a single event can disrupt trade flows, leading to widespread losses across multiple insured portfolios. Insurers must assess the potential cascading effects of catastrophic events and develop robust risk management strategies to withstand such shocks.

VALUE AND UNITS OF CARGO

The diversity of cargo types transported via maritime shipping introduces another layer of accumulation risk.

Certain commodities, such as electronics, pharmaceuticals, or perishable goods, are more valuable

“The interconnected nature of global trade means that a single disruptive event can have cascading effects, amplifying the magnitude of losses for insurers and their insureds.”

Helen Steadman, AXIS

and susceptible to damage or theft.

Moreover, fluctuations in demand or supply chain disruptions can lead to increased concentrations of specific cargo types, amplifying the potential impact of losses for insurers and their insureds.

The size and composition of the maritime fleet also influences accumulation risk in the marine cargo market.

Mega container vessels, ships capable of carrying thousands of units of cargo, have become increasingly prevalent, concentrating larger cargo volumes on individual voyages.

While economies of scale benefit shipping operators, insurers must account for the heightened exposure posed by these massive vessels and their cargoes.

POST-PANDEMIC CHANGES

Before the Covid-19 pandemic, many product suppliers operated through ‘just in time’ manufacturing processes, ordering parts as and when they needed them to reduce storage of sitting stock.

When the pandemic hit and the ports closed, weaknesses in the strategy emerged and many manufacturers ran out of the supplies needed to build their product.

This caused many companies to shift to holding more stock at one time to ensure they were still able to produce their goods with fewer delays. The impact for cargo insurers has been an emergence of new excess stock opportunities, which, ironically, adds more accumulation.

In recent years, insurers have been adapting to this change and the increase in accumulation risk as more stock remains at a standstill for longer periods.

OPPORTUNITY KNOCKS

While accumulation risk presents many challenges to the marine cargo sector, there is also an opportunity for insurers to differentiate themselves through innovation.

Traditional risk assessment methods of accepting that risks on board vessels or at ports while in transit are part of the overall portfolio, and that the likelihood of one insurer being adversely exposed is small, are accepted by the market as functional though imperfect.

Ongoing lack of data and a pan-industry solution for tracking cargo to its precise point continue to make accumulation risk an ongoing conundrum for insurers.

Emerging technology such as blockchain and advancements in risk modelling may eventually offer new channels for insurers to assess and manage accumulation risk more effectively, however, today these remain in the early stages of development.

To do this, would require a reliable source to capture the full range of world trade. Data sources, such as customs documents, would need to be deemed fully reliable and, having obtained such data, it would then remain to establish what proactive use this can be to the underwriting process.

“Mega container vessels, ships capable of carrying thousands of units of cargo, have become increasingly prevalent, concentrating larger cargo volumes on individual voyages.

Helen Steadman, AXIS

LOOKING FORWARD

Would it change our view of risk? The ability to accurately know our exposures in the event of a loss occurrence is a nice to have, but the question remains of where the data can take us beyond a retroactive perspective.

Accumulation risk remains a challenge for insurers in the marine cargo market. The interconnected nature of global trade, coupled with the complexities of maritime risks, underscores the importance of adaptability and robust risk management practices.

By understanding the sources of accumulation risk, leveraging advanced data and analytics, and embracing innovative approaches to risk transfer, insurers can navigate the waves of uncertainty, develop more tailored specialty solutions and elevate the resilience of the marine cargo sector in an ever-evolving risk landscape.

Technology delivers solutions in volatile world

Stefan Schrijnen , Chief Commercial Officer at Insurwave, describes how technology can help mitigate and manage the ever-rising threat of political risk

From the Ukraine conflict to the escalating tensions surrounding the Taiwan Strait, the shifting geopolitical landscape significantly impacts the marine insurance market.

Recent geopolitical shifts have pressured insurers to prove they have a holistic view of their accumulations and aggregate limits. Technology will play a pivotal role in supporting this through platforms that allow real-time tracking of exposures and greater efficiency of insurance administration.

Technology aside, effectively addressing the impact of recent conflicts on the marine insurance market will require coordinated international efforts from industry stakeholders alongside governments and shipping companies.

SETTING THE SCENE

Ongoing conflicts in the Red Sea have created challenges for global shippers of essential goods, but this is just one of the many issues confronting major carriers as 2024 begins.

From Ukraine and the Black Sea to China and the Taiwan Strait, culminating in the recent Red Sea turmoil as a result of the Israel/Hamas conflict, the current geopolitical shifts underscore the world’s profound reliance on the uninterrupted functioning of shipping and highlight the potential challenges that vessels and shipping companies may encounter in troubled maritime regions.

TOTAL LOSSES

The war in Ukraine was a poignant reminder to the marine market of the potential claims resulting from blocking and trapping, with insurers typically paying out for total losses on ships if they are detained in war zones for more than a year.

The mass detention of ships in Ukrainian ports following Russia’s invasion resulted in a sizable claims bill for marine war underwriters and prompted an increased focus on global exposures and aggregations.

In recent news, Iran-backed Houthi militants in Yemen have stepped up attacks on vessels in the Red Sea to show support for the Palestinian group Hamas following the start of Israel’s military campaign in Gaza.

As a result, many cargo ships were rerouted through the Cape of Good Hope, which, while offering a solution, will also extend transit times, increase transportation costs, and strain supply chains globally.

For example, on December 18, we noticed a vessel on our platform which left Europe in early December head through the Strait of Gibralter, only to make a u-turn due to the escalation of the Red Sea situation.The vessel had to alter its path, travelling around the Cape of Good Hope and through the southern Indian Ocean, adding approximately 5,000 miles to its journey. (see graphic below)

It is clear from these ongoing events that the world is dependent on shipping for global trade. With between 80% and 90% of international trade moved on board ships, the risk continues to rise, with insurance costs increasing to reflect the increased risk.

A coordinated international effort is required to ensure these vital trade paths remain viable, and tech-powered insurance is a big part of the solution.

INTERNATIONAL COLLABORATION

Collaborative efforts among maritime stakeholders, such as governments, insurers, and shipping companies, are essential to implement robust risk mitigation measures successfully.

Strengthening security protocols, fostering intelligence-sharing mechanisms, and making strategic investments in state-of-the-art surveillance technologies enhance the region’s maritime safety.

Left: The ships journey on Dec 18. Above: A zoom-in of the u-turn.

For example, during the early days of the conflict, a collaboration between Russia, Ukraine and the UN resulted in a deal being brokered to allow grain to be transported through the contested waters. Implementing a “safe corridor” system guaranteed the shipments against bombing or other threatening actions.

In this instance, the Lloyd’s market brought together skilled teams who mobilised quickly and facilitated a bold solution, creating the AsOne Ukrainian grain facility in partnership with the UN.

Brokered by Marsh, with Ascot as the lead underwriter and Insurwave as Ascot’s technology partner, AsOne increased the speed to cover risk with access to real-time data on Insurwave’s platform. This resulted in more than 100 cargo policies (representing more than 80 shipments) recorded and tracked on Insurwave, with almost $1.5bn of goods covered and transported safely.

The collaboration enabled by Insurwave’s platform unlocked a new efficiency level for all parties involved in the AsOne Ukrainian grain facility. We provided the services around the mapping of assets to a facility led by Ascot and brokered by Marsh.

It enabled all parties to track the vessels in the Black Sea, so that they were fully aware of the exposures and, more importantly, the aggregation of those exposures.

“Recent geopolitical shifts have pressured insurers to prove they have a holistic view of their accumulations and aggregate limits. Technology will play a pivotal role in supporting this through platforms that allow real-time tracking of exposures and greater efficiency of insurance administration.”

Stefan Schrijnen, Insurwave

As a result, all parties benefited from a better flow of information and faster, more accurate decision-making thanks to the visualisation of live risk data and automation.

ROLE OF TECHNOLOGY

As the previous example demonstrates, technology plays a vital role in geopolitical tensions, acting as an integrator between all insurance parties, ensuring they all gain access to

the same data to allow for faster, more accurate decision-making and increased speed to cover.

Insurers are going to need to know what the risk is and what the assets are that they are insuring, where the assets are, what the value is, and what the aggregation is in certain locations. That can only be achieved if the data is collected digitally and housed in a completely visible way to the insurers and financiers.

When analysing the current state of affairs in the Red Sea, through data management platforms, insurers could better track the vessels operating in the area and effectively automate the administrative effort involved in quoting and charging additional premiums.

Looking to the future, insurers could potentially react to the situation in the Red Sea in three different ways: those who avoid the exposure to the risk, those who perceive it as an opportunity and offer higher quotes to provide cover and those who seek a middle ground between the two solutions.

In this scenario, the insurers could become engaged with a consortium of insurers and offer reduced capacity only for significantly more premium alongside increased government intervention and protection.

INSURING THE FUTURE

Undeniably, the continued escalation of geopolitical conflict

“When analysing the current state of affairs in the Red Sea, through data management platforms like Insurwave (seen above), insurers could better track the vessels operating in the area and effectively automate the administrative effortinvolved in quoting and charging additional premiums.”

worldwide has increased the risks of sending ships across the globe.

While a multinational naval coalition is expected to address the security challenges in the Red Sea, the financial impact on shipping lines, cargo owners, and insurers will remain for some time.

During times of uncertainty, data management platforms are vital to helping insurers and operators keep pace with the developments and have visibility of their exposures at all times.

Insurers and operators will need to operate with increased diligence, and the added insights technology providers can share can afford these entities a degree of strategic preparation during a period of uncertainty and high risk.

Ramifications of seizure

On 17 January 2024 the Supreme Court handed down judgment in Herculito Maritime Ltd v. Gunvor International BV [2024] UKSC 2 (the “Polar”), which considered the ramifications of a piratical seizure in the Gulf of Aden. In this short case-note, Guy Blackwood, KC, Quadrant Chambers, summarises the decision reached by the Supreme Court and its implications

In Herculito Maritime Ltd v. Gunvor International BV [2024] UKSC 2 (the “Polar”), for the first time, the UK’s Supreme Court identified the juridical basis on which an implied insurance code arises as a matter of construction in a contract, by which parties agree to look solely to insurers as the avenue of recourse and not to their contractual counterparty.

An insurance code was “akin to a necessarily implied term and involves a similarly high threshold”. That high threshold was not met. This has implications for contracts which provide that one contractual party is obliged to pay insurance premium, including charterparties, construction/ finance contracts and commercial leases.

The Supreme Court approved the decision of the Court of Appeal in The Product Star and dicta contained

in The Paiwan Wisdom.

As a consequence, in charterparties containing an agreement to proceed via Suez and necessarily the Gulf of Aden/Red Sea, the shipowner cannot exercise general liberties to deviate and proceed around the Cape of Good Hope to avoid war risks unless there has been a qualitative change in circumstances. This might be of immediate significance in the context of attacks by the Houthi movement on commercial vessels in the Red Sea.

ISSUES ON APPEAL

On October 30 2010, the MV Polar was seized by Somali Pirates whilst transiting the Gulf of Aden. A ransom was paid for the vessel’s release and the shipowner declared general average, which was subsequently adjusted.

Cargo interests argued that they had no liability to contribute in general average because the voyage charter contained an ‘insurance code’, by which the parties had agreed to look only to shipowners’ insurers as the avenue of recourse in the event of the occurrence of a war risk in the Gulf of Aden and not to charterers. This insurance code was, cargo interests submitted, incorporated into the bills of lading.

The appeal raised four principal issues:

(1) Whether the charter contained an insurance code in its war risks clauses and the Gulf of Aden clause which precluded owners from claiming from charterers in respect of war risks arising in the Gulf of Aden;

(2) If so, whether those clauses were incorporated into the bills of lading;

(3) Whether on a proper interpretation of the bills or by implication, the shipowner was precluded from claiming against the bill of lading holders; and,

(4), whether the wording of those clauses should be manipulated so as to substitute the words “the charterers” with “the holders of the bills of lading”.

The tanker voyage charter provided that the voyage was to be “via Suez” and included an additional Gulf of Aden clause and a war risks clause.

The Gulf of Aden clause provided, in its first paragraph that half of any time awaiting an escort or other protective measures would count against laytime or, if applicable, as time on demurrage.

The second paragraph provided that any additional costs would be shared 50/50 between the shipowner and the charterer.

The third paragraph required that any additional insurance premia would be for charterers’ account, subject to a cap of US$40,000.

The war risks clause provided that any additional premia payable in respect of war risks incurred by reason of the vessel trading to excluded areas was to be for charterers’ account.

The charter incorporated the BPVOY 4 standard form,

with the extensive liberties provided for by clause 39, which included within war risks “acts of piracy”.

The bills of lading were on the INTERTANK 78 form, which included broad general words of incorporation of the clauses in the charter.

Issue (1), did the charter contain an implied insurance code? The Supreme Court held that the charter did not contain an implied insurance code, with the consequence that cargo interests’ appeal failed in limine.

Whether or not the parties had agreed an insurance code or fund was a matter of construction of the charter. An implied insurance code was “akin to a necessarily implied term and involves a similarly high threshold”.

Importantly, the Supreme Court disagreed with the dictum of Longmore LJ in The Ocean Victory that “the prima facie position where a contract requires a party to that contract to insure should be that the parties have agreed to look to the insurers for indemnification rather than to each other.”

The Court held that “there is no prima facie position in these cases. It always depends upon the construction of the contract terms as a whole and the necessary consequences of what has been agreed in relation to insurance.”

Having considered The Evia (No. 2), The Concordia Fjord and The Chemical Venture the Court identified four general considerations which were of relevance to the appeal:

1. For a shipowner to have given up a valuable common law right such as general average in relation to well-known kidnap and ransom risks requires a clear agreement to that effect;

2. To establish that the parties have agreed an insurance code it has to be shown that this is a necessary consequence of what has been agreed, which is a high threshold;

3. The case was not one of joint names insurance; and,

The Supreme Court approved the decision of the Court of Appeal in The Product Star and dicta contained in The Paiwan Wisdom. As a consequence, in charterparties containing an agreement to proceed via Suez and necessarily the Gulf of Aden/Red Sea, the shipowner cannot exercise general liberties to deviate and proceed around the Cape of Good Hope in order to avoid war risks unless there has been a qualitative change in circumstances.

4. There is no principle exempting charterers from liability for their breaches of contract or in general average merely because they have provided the funds whereby owners insured themselves against the relevant loss or damage.

Cargo interests submitted that the charter was materially indistinguishable from that in The Evia (No. 2). The Supreme Court disagreed, distinguishing each of the five features stressed by Lord Roskill in The Evia (No. 2):

1. Cargo interests’ case was that clause 39 of the BPVOY standard form conferred “an unqualified right” and an “absolute veto” on shipowners’ comparable to clause 21 of the Baltime form considered in The Evia (No. 2). The Supreme Court disagreed:

While clause 39 was expressed in broad and unqualified terms, it had to be viewed in its context. That context included the parties’ agreement that the contractual voyage would be “via Suez” which would necessarily take the vessel through the Gulf of Aden, the well-known risk of piratical attack and seizure for ransom and the detailed agreement between the parties as to the terms on which the vessel was to transit the Gulf of Aden.

Against that background, it would not have been open to the shipowner to assert that the known piracy risks were “war risks” within the meaning of clause 39 so as to enable the shipowner to refuse to transit the Gulf of Aden and proceed round the Cape of Good Hope instead. The position might have been different if there had been a qualitative change in the risk of proceeding through the Gulf of Aden after the charter had been concluded, but in the appeal no change in risk was suggested. If needed, support for this construction was derived from the decision of the Court of Appeal in The Product Star and in dicta contained in The Paiwan Wisdom

The “unqualified right” or “absolute veto” stressed by Lord Roskill was not present in relation to transit of the Gulf of Aden.

2. The obligation on charterers to pay premium was by no means determinative and there was a cap on that obligation, so there could have been a sharing of costs.

“On October 30 2010, the MV Polar was seized by Somali Pirates whilst transiting the Gulf of Aden. A ransom was paid for the vessel’s release and the shipowner declared general average, which was subsequently adjusted.”

3. The additional obligations which might have fallen on charterers under clause 39 of the BPVOY form did not arise, because it was not open to cargo interests to submit that the known piracy risks were “war risks” within the meaning of clause 39. Even if there had been such additional obligations, they were not comparable those assumed by charterers under clause 21 of the Baltime form considered by the House of Lords in The Evia (No. 2). The shipowner’s right to claim additional freight or divert the vessel under clause 39 did not address delay in the war risk zone, nor did they disapply an otherwise contrary position. They merely echoed similar rights to be paid for additional services by the shipowner outside the war risks context.

4. The rubric of the clauses was not a factor of much weight.

5. There would be no “remarkable result” (to use Lord Roskill’s moniker) absent an implied insurance code, because charterers did obtain the significant benefit of being able to transit an otherwise prohibited zone, the Gulf of Aden, in consideration for the payment of additional war risks premium.

The Supreme Court emphasized that The Evia (No. 2) did not establish any general principle, turning as it did on the particular terms of the charter in that case. Arbitrators ought to be “cautious before concluding that the reasoning and decision in The Evia (No 2) should be followed in relation to differently termed charters”.

Issue (2) – whether all material parts of these war risks clauses were incorporated into the bills of lading

The Supreme Court approached incorporation by reference to the following considerations:

Bills of lading are negotiable instruments and the contractual rights and obligations thereunder may be transferred down a chain of contracts to the ultimate receiver.

Bills of lading on a single voyage may be for different cargoes and may be negotiated to a variety of receivers at different times. When a bill of lading is concluded, the identity of the receivers and the proposed discharge port may not be known, and may change by the time the vessel arrives at her destination.

Cargo interests may have no knowledge of the charterparty terms and no ready means of finding out.

What matters are the incorporating words in the bill of lading, not provisions relating to incorporation in the charter.

Many cases state that general words of incorporation only incorporate provisions of the charter which are “germane” to the shipment, carriage and delivery of the goods. This was not archaic language and remained an apt term, but if any tribunal would prefer to use a synonym, the Court suggested “referring to provisions which ‘directly relate’ to shipment, carriage and delivery” provided that it was understood that no change in meaning is intended thereby.

Aside from ancillary agreements, the incorporation only of terms which are directly relevant to shipment, carriage and delivery excludes provisions which are inapplicable in the bill of lading context, such as provisions which relate to the approach voyage.

The case law on incorporation was not “dated” as cargo interests submitted but “involves an appropriately iterative approach”.

The focus of the argument in the appeal was on those parts of the war clauses which addressed the obligations for payment of insurance premia.

To give effect in the bills of lading to the agreed allocation of risk in relation to transiting the Gulf of Aden, the entirety of the Gulf of Aden clause and the war risks clause should be regarded as incorporated in the bills of lading so as to be read alongside clause 39 of the BPVOY 4 standard form, as they would be in the charter.

Even if the Gulf of Aden Clause and the war risk clause did not restrict the shipowner’s liberties under clause 39, they would still be directly relevant to the carriage. For example, if the charterer did not pay the additional premium due for transiting the Gulf of Aden, the shipowner might refuse to proceed there.

Issue (3) – Whether on the proper interpretation of those clauses in the bill of lading and/or by implication the shipowner was similarly precluded from claiming for such losses against the bills of lading holders:

Issue (3) was premised on two assumptions. The first was that the charter did contain an insurance code, contrary to the finding of the Supreme Court. The second was that there was no manipulation of the wording. On these premises:

The obligation to pay premium rested on the charterers alone and no such obligation was imposed on the bills of lading holder. If so, then an essential reason for holding that there is an insurance code was inapplicable and there could be no “remarkable result” absent a code, because the bill of lading holder would not have paid the insurance premium.

The obligation is that of the charterer and it has its own interest in ensuring proper performance of the charter. The bargain made is that the parties to the charter would not look to one another to make good an insured loss, which is a bilateral agreement only. In the circumstances, the Supreme Court rejected cargo interests’ case on Issue (3).

Issue (4) – If necessary, whether the wording of those clauses should be manipulated so as to substitute the words “the Charterer” with “the holder of the bill of lading” in the parts of those clauses allocating responsibility for the payment of additional insurance premia.

Manipulation of charter clauses incorporated by general words of incorporation may be permissible “if it is necessary to do so in order to make the wording fit the bill of lading.” There was no need to do so on the facts of the case, because the Gulf of Aden and the war risk “make perfectly good sense in the context of the bills of lading as a record of the terms upon which the shipowner has agreed to transit the Gulf of Aden.”

Further, there were “positive reasons why there should be no manipulation”. One of the factors emphasized in The Miramar was the implausibility of bill of lading holders accepting a potential liability to pay unknown and unpredictable amounts. Similar considerations arose on the appeal:

If the bills of lading holders are liable to pay the insurance premium, the basis of that liability vis a vis the shipowner was wholly unclear.

Was each bill of lading holder liable for the full premia? If not, was its liability proportionate and if proportionate, proportionate to what?

If a bill of lading holder pay the insurance premia what are its rights of recourse against other bills of lading holders and how are they to be enforced?

In the circumstances, the Supreme Court rejected cargo interests’ case on Issue (4).

* Guy Blackwood KC led Oliver Caplin for the successful shipowners, their H&M and their K&R underwriters.

Americas

30 April 2024

07.45-09.00: Registration and Refreshments

08.55-09.00: WELCOME ADDRESS: Grant Attwell, Managing Director, Cannon Events

09.00-09.30: KEYNOTE ADDRESS: State of the Market 2024

The marine insurance market is undergoing significant changes as it moves away from the corrective phase. Jim will provide an update on the current state of the market, including the marine, cargo, and logistics sectors. He will also address key concerns from both industry and client perspectives.

Presenter: Jim Matthews, Senior Client Advisor, SVP, US East Zone Marine Practice, Marsh

09.30-10.10: PANEL DISCUSSION: Running Out of Water – Climate Change Becomes Reality

Moderator: Jennifer D’Arcy, Executive Vice President, Head of Marine FAC, Acrisure Re

Pannelists: Frank Gonynor, Senior Claims Adviser/Lawyer, Gard North America, Thiago Gonçalves, Managing Director, Head of Marine, Cargo and Logistics - Latin America & Caribbean – LAC, Marsh, Matias Bøe Olsen, Senior Executive Underwriter & Decarbonisation Coordinator, Skuld, Flor Torrijos, Managing Partner, InterMaritime

10.10-10.50: PANEL DISCUSSION: Where’s the Competitive Advantage in Technology?

All firms have some sort of technology on board, leading to the question of how companies can gain competitive advantage through their use of technology. This session will explore the emerging technologies, and discuss how companies can use these to their advantage.

Modertor: Matt Roper, Marine Practice Leader, One 80 intermediaries

Pannelists: Chris Law, Senior Vice President Marine Risks and Loss Control, Aon, Charlie McCammon, Director Marine Consulting, Willis Towers Watson, Simon Hodgkinson, Global Head of Loss Prevention, West of England Club, Tim Crowe, Director, RB Jones

10.50-11.20: COFFEE AND NETWORKING BREAK

11.20-11.40: PRESENTATION: Changing the Rules –The Ocean Shipping Reform Act 2022

These new rules followed disputes between container carriers and US companies. This session will explore how this new Act is working in practice, and answer whether or not it has changed market practice in the expected way.

Presenter: Andy Lewis, Senior Vice President, McGriff

11.40-12.20: PANEL DISCUSSION: How to Interpret the Rules, and How to Settle through Arbitration?

Arbitration is a necessarily closed-doors affair, but how does the marine market learn from these cases and understand how to interpret the rules in the future? This session looks at recent arbitrated cases that have come into the spotlight, and at the trends for both mediation and arbitration.

Panelists: Molly McCaffety, Senior Vice President, Co-Global Claims Director, Shipowners Claims Bureau, Inc, Aase Naaman Jensen, Senior Vice President, Skuld, Frank Sioli, Director/Shareholder, Sioli, Alexander, Pino Law, Ed Carlson, Senior Claims Executive, U.K P&I Club

12.20-13.00: PANEL DISCUSSION: Inching Upwards –Coverage Creep

After several years of a hard market, this sessions asks whether there are signs of a softer period ahead. It appears there are signs of coverage creep, heralding a new market cycle. We ask what that means for the market in the year ahead. Is it simply about terms and conditions, or are rates and deductibles changing, too?

Moderator: John Miklus, President, American Institute of Marine Underwriters

Pannelists: Lincoln Purdy, Vice President, Starr Marine, Ryan O’Connor, North American Regional Head Ocean Cargo, Allianz Global Corporate & Specialty, Joe Crace, Global Risk Manager, Dole, Ken Fichtelman, PartnerMarine, McGill

13.00-14.00: LUNCH BREAK

14.00-14.20: PRESENTATION: Red Sea Insurers Wary of Transit Risks

Presenter: Gina Hernandez, Assistant Vice President, Marine Product Leader – Eastern Territory, CNA Hardy

14.20-14.50: FIRESIDE CHAT:

Time for a Revamp? Marine Warranties Under Scrutiny

Participants: Jarek Klimczak, Master Mariner, Senior Risk Account Consultant, Marine – Americas, AXA XL Risk Consulting, Capt. Rahul Khanna, Global Head Marine Risk Consulting, Allianz Global Corporate & Specialty, James Vavasour, BoD, Society of Marine Warranty Surveyors

14.50-15.30: PANEL DISCUSSION: All Change – New Leaders Changing the Shape of Latin American Markets

Pannelists: Juan Carlos Martinez, Chairman and Chief Executive Officer, CargoCorp UW, Rafael A. Diaz-Oquendo, Vice President, Regional Manager (Latin America), UK P&I Club, Efrain Ignacio Sora, Vice President, Marine, Marine, Latin America and the Caribbean, Navigators

15.30-15.50: COFFEE AND NETWORKING BREAK

15.50-16.20: PRESENTATION: The Weapon of Choice – Sanctions

For the past few years, the US and Europe in particular have made sanctions their weapon of choice in the face of conflict. Today, there are US sanctions applying all across the world, and they change almost daily. This session will take a brief look at the ever-changing sanctions regime, and the geo-political environment in which they sit, from Black and Red Sea tensions to China and beyond.

16.20-16.40: PRESENTATION: Adding up the Aggregation

Presenter: Andy Yeoman, Chief Executive Officer, Concirrus

16.40-17.00: PRESENTATION: What Does Safe Look Like?

The Latest on Lithium Batteries

Presenter: Todd Hohlweck, US Marine Industry Technical Leader, Senior Vice President – Global Marine Practice, Marsh

Plotting a course to sustainable growth

Kevin Shallow , Executive Director for International Markets at QBE, looks at current Red Sea-linked disruption, and explains how the medium-term outlook for maritime trade is positive

Maritime trade remains critical to the global economy with around four-fifths of the volume of international trade in goods carried by sea.

Finely balanced supply chains rely on the efficiency of maritime transport as the means of moving goods at scale, supported by just-in-time scheduling, precise planning of port operations and onward transport of goods.

Changes to operations, including diversion from a planned route, have contractual and labour implications that can reduce this efficiency.

This is currently reflected in the ongoing situation in the Red Sea where from November 19, the Yemen-based rebel Houthi movement has targeted shipping using a variety of tactics with increasingly unpredictable targeting.

The impact on the Red Sea and Suez Canal route has been dramatic, with monthly transits through the canal down by 41% in January 2024, relative to October 2023.

AVOIDING THE RED SEA

Despite the increasing naval presence in the region which has to date been willing and able to intercept attacks alongside successive rounds of airstrikes on Houthi ground positions, the Houthi strikes continue.

The effected area extends across the southern Red Sea, Bab el-Mandeb Strait and Gulf of Aden. The Houthis have diversified their tactics, including recently deploying an underwater drone which was intercepted by US forces.

In light of the security situation and significant changes to the costs of using the route (including increased insurance costs), maritime traffic in the Red Sea and Suez Canal is likely to remain reduced. The Houthis have stated their preferred

targets as vessels linked to Israel, the UK and US.

But even where transit is considered, decision-making (as it relates to the risk profile of any specific vessel) is complicated by the international nature of maritime transport where ownership, management, cargo, and crew are often linked to multiple countries.

Diversion from the Red Sea necessitates use of the only available alternative route – around the Cape of Good Hope (South Africa). Beyond the increased costs for crew and fuel provision and rescheduling of port calls due to longer transit times, diversion will drive further delays.

This has included backlogs at intermediate ports for bunkering (refuelling) operations, with many not established as hub locations, and the need to adjust for scheduled crew changes.

The Red Sea route handles 12% of global trade but significant within this are the trade links between European and Asian markets.

Rerouting away from the Red Sea exposes supply chains to increased pressure. For example, as the German construction, automotive, chemicals and machinery industries source inputs heavily from Asia they face delays and potentially increased costs.

SUSPENDED PRODUCTION

Illustrative of this is that some automotive plants in Europe have suspended production as a result of delays in obtaining production components from Asia, examples include Volvo’s plant in Belgium and Tesla’s in Germany (as reported by Reuters, Bloomberg and the New York Times.)

The impact is demonstrated across various sectors; oil companies such as BP and Equinor are rerouting tankers,

“The impact on the Red Sea and Suez Canal route has been dramatic, with monthly transits through the canal down by 41% in January 2024, relative to October 2023.”

increasing transport costs and transit times. Should this result in energy supply disruptions it would impact commodity prices and have a ripple effect throughout the economy.

On the other hand, from Asia’s perspective, most of China’s intermediate goods imported from Europe include machinery and electrical equipment, chemicals, rubber and plastics, pharmaceuticals, and motor vehicles.

The Chinese automotive, computer and electronics, chemicals, and machinery industries rely on these imports and could be impacted if disruptions to the Red Sea trade route persist.

ASIA DRIVES GROWTH

Nonetheless, global trade volumes are expected to pick up again. Despite a brief downturn in global trade in 2023, goods trade volumes are forecast to increase by 2.3% in 2024. Although sluggish, this is expected to persist for the next five years, contributing to growth trends in the maritime transport industry.

Globally the maritime transport industry’s contribution to GDP is forecast to grow by 4.5% this year ultimately expanding by 20.1% in the next five years. Most of this growth is anticipated in Asia, which represents 60% of the global maritime transport industry. Specifically, Asia’s maritime transport industry is expected to grow by 23.5% over the next five years.

In Asia, the industry is set to experience its most rapid growth in Vietnam (37.5%), Indonesia (33.7%) and the Philippines (32.7%) over the next five years, with China lagging behind. Chinese trade levels are on a negative trend, reflecting relatively lower consumer demand and the real estate crisis.

However, China is expected to remain a major driver in the region, contributing to more than 40% of the growth in Asia’s maritime transport, mostly due to its substantial share of the region’s value-added output.

Most of the growth in Asia could reflect intra-Asian containerised trade, which has witnessed its share increase over the years. UNCTAD data reveal that intra-Asian routes serving intraregional supply chains exhibit the highest growth rates. This trend mirrors global manufacturing patterns, with China maintaining its position as a manufacturing leader, supported by neighbouring East Asian countries. It also reflects the growing participation of East Asian countries in regional and global value chains.

SUSTAINABLE GROWTH

Europe also boasts a significant maritime transport industry with a fifth of the global share and is poised for substantial growth which is initially expected to outpace that of Asia over the next four years.

Denmark and Norway are expected to be key drivers,

“Despite the increasing naval presence in the region which has to date been willing and able to intercept attacks alongside successive rounds of airstrikes on Houthi ground positions, the Houthi strikes continue.”

jointly driving 40% of Europe’s maritime transport industry growth for the next five years. Conversely, the Americas represent just under a tenth of the global maritime transport industry and are expected to grow at a slower rate of 7%, lagging behind all.

Africa’s maritime transport industry is expected to grow by 18% in the next five years – the vast majority of which will be driven by Egypt. This largely reflects activity related to the Suez Canal connecting the Red and Mediterranean Seas. The canal handles approximately one-seventh of global trade and accounts for 2% of Egypt’s gross value-added output annually.

Despite international complexities contributing to immediate term challenges for maritime transport, looking ahead, the industry can take some relief that the medium-term economic forecast is for calmer seas with sustained growth on the horizon.

This article was produced by QBE with Oxford Economics and Control Risks

PIC: THE INDIAN NAVY

Geopolitical tensions, droughts and delays impact maritime decarbonisation goals

The global maritime sector has come under increasing pressure to decarbonise. Around 80% of goods transported internationally are shipped. However, shipping is also responsible for approximately 3% of global greenhouse gas emissions (GHGs).

During COP 28, the UN climate change conference that took place in November/December 2023, it was estimated that shipping emissions have risen by 20% in the past decade.

The industry is seeking to address the problem through a combination of emissions regulations, voluntary stakeholder initiatives and technological solutions aimed at making ships more energy efficient.

In this article, we consider how the successful progress of maritime decarbonisation through energy efficiency can be impeded by political and climate events as recent events in Ukraine/Black Sea, Red Sea and the Panama Canal cause concerns for shipowners aiming to meet their regulatory targets.

IMO REGULATIONS

On 1 November 2022, technical and operational amendments to the International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI entered into force.

These amendments were developed under the framework of the Initial International Maritime Organisation (IMO) Strategy on Reduction of GHG Emissions from Ships agreed in 2018, pursuant to which the IMO committed to reduce carbon intensity from all ships by 40% by 2030 compared to 2008 and by 50% by 2050.

The amendments require ships to reduce their GHGs by improving their energy efficiency in the short term.

From 1 January 2023, it became mandatory for all ships to calculate their attained Energy Efficiency Existing Ship Index (EEXI) to measure their energy efficiency and to initiate the collection of data for the reporting of their annual operational carbon intensity indicator (CII) and associated CII rating.

While EEXI is determined on a one-off basis, CII is verified annually and requires continuous improvement in the vessel’s operational carbon intensity.

The CII regime applies to all ships above 5,000 GT which are: bulk carriers, gas carriers, tankers, container ships, general cargo ships, refrigerated cargo carriers, combination

carriers, LNG carriers, vehicle carriers, Ro-Ro cargo vessels, Ro-Ro passenger vessels and cruise ships.

Carbon intensity links the GHG emissions to the amount of cargo carried over distance travelled. The CII determines the annual reduction factor needed to ensure continuous improvement of a ship’s operational carbon intensity within a specific rating level.

The actual annual operational CII achieved must be documented and verified against the required annual operational CII. This enables the operational carbon intensity rating to be determined. The first annual reporting had to be completed in 2023, with initial CII ratings given in 2024.

Based on a ship’s CII, its carbon intensity will be rated A, B, C, D or E (where A is the best). A ship rated D for three consecutive years, or E for one year, will have to submit a corrective action plan to show how the required index of C or above will be achieved.

Flag states and port authorities have been encouraged by the IMO to provide encouragement to vessels that achieve ratings of A or B. Furthermore, the thresholds for the different ratings will become more stringent as 2030 approaches.

COMPLICATING FACTORS

The Ukraine conflict has resulted in the closure of many ports in the Black Sea region, delays and congestion in transport corridors and the rerouting of ships.

Furthermore, extreme drought in the region has led the Panama Canal Authority to reduce daily traffic through the Panama Canal by almost 40% compared to last year.

While a number of shipping companies have chosen to transport some of their cargoes by rail or air instead, others have diverted their ships to other shipping routes.

In normal circumstances, the obvious alternative route is via the Suez Canal. However, due to recent Houthi attacks on shipping traffic in the Red Sea, most container ships are being rerouted from the Suez Canal.

It has been estimated that between 10% and 15% of global shipping and about 40% of the Asia-Europe trade passes through the Red Sea. Where shipping companies are diverting their vessels to the Cape of Good Hope, when they had originally been intended to transit the Suez Canal, the longer journey adds about 3,000 nautical miles and an average of 12 days to the voyage. This has considerable

Beth Bradley (left) (Partner - Shipping) and Reema Shour (Professional Support Lawyer – Shipping) at Hill Dickinson explain the pressures surrounding the global effort to decarbonise shipping

“Where shipping companies are diverting their vessels to the Cape of Good Hope, when they had originally been intended to transit the Suez Canal, the longer journey adds about 3,000 nautical miles and an average of 12 days to the voyage. This has considerable operational, logistical and financial consequences.”

operational, logistical and financial consequences.

EMISSIONS

The geo-political risks also cause an environmental impact. When the CII regime was implemented, it was expected that a significant proportion of the global fleet would reduce speed and slow steam their ships to achieve a compliant CII rating.

Now, however, because of longer routes being chosen, the outcome is higher fuel consumption. It has been estimated that a voyage from Singapore to Rotterdam via the Cape of Good Hope results in 40% more carbon emissions than the Red Sea route.

Ships are also in some cases sailing at a higher speed in order to make up for the longer voyage time and delays. It has been reported that ships are sailing 10% faster when they take the Cape of Good Hope route instead of the Red Sea route. Increased speed results in higher fuel consumption and more emissions.

This automatically results in an increase in the ship’s carbon intensity and it therefore potentially risks an adverse CII rating in the following year.

While a negative CII rating does not attract any

financial or penal consequence at this stage, the IMO’s Maritime Environment Protection Committee (MEPC) will review the effectiveness of the implementation of EEXI and CII requirements by January 2026 at the latest.

The MEPC will then develop and adopt any further amendments that may be required and may also consider whether any further regulatory incentives are required.

In the meantime, a negative CII rating may affect a ship/ shipowner’s reputation. This may result in reduced charter rates or resale values for poorly rated ships or a tightening in finance and insurance cover where institutions are focusing on decarbonisation measures through the Poseidon Principles for Financial Institutions and Marine Insurance.

IMPACT

There has been much commentary around the pressing matters related to the safety of shipping because of geo-political upheaval. A lesser considered area is the inadvertent consequences of re-routing shipping on the IMO’s decarbonisation ambitions and the impact on vessel CII ratings.

We must all do our part.

Good money after bad

Captain (Retd.) Neil Watts , Culmen, analyses the risks posed by constantly expanding sanctions on the financial services sector

Sanctions have been the defining feature of the international community’s response to geopolitical challenges or threats in recent times.

International sanctions are legally binding and enforced by governments and international bodies. With these geopolitical fences established around certain jurisdictions or transactions (targeted sanctions), companies wishing to conduct international trade must confront these ever expanding compliance challenges.

This evolving sanctions regime demands constant vigilance and adaptability from institutions, as they seek to mitigate the risks and navigate the turbulent waters of international finance and trade.

KYC DUE DILIGENCE

Within this context, screening clients for sanctions breaches has become an increasingly important component of anti-money laundering (AML) protocols in addition to know-your-customer (KYC) due diligence.

A frustrated client recently informed me that: “A few years back if there were sanctions against a country, we simply stopped doing business with any entities related to that country. Now, there are so many sanctioned jurisdictions we would go bankrupt with that approach. To do business profitably in this congested environment, we have to be able to be more selective and only avoid specific companies, individuals, or transactions in our dealings.”

At a minimum, compliance teams face at least two constraints: those of bandwidth and resources. This team plays a pivotal role in safeguarding the company’s interests, managing risks, and maintaining compliance with relevant rules and regulations.

While most companies aspire to operate within legal boundaries, discerning the adequacy of their compliance frameworks often proves difficult.

In reality, many institutions neglect to review their sanctions screening processes on a regular basis and even less proactively seek to improve and strengthen their compliance procedures.

In the current climate, the repercussions for companies that

inadvertently violate sanctions through insufficient screening have never been more punitive. Regulatory scrutiny surrounding sanctions is stricter than ever and penalties for non-compliance can cost companies millions of dollars.

RISK MITIGATION

To delve a bit deeper into the nature of these risks and requirements:

> Financial losses - sanctions can lead to asset freezes, seizures and forfeitures. Institutions that inadvertently handle funds related to sanctioned entities may face significant financial penalties.

> Risk mitigation - financial institutions must implement robust due diligence processes to avoid handling illicit funds.

> Correspondent banking risks - sanctions can disrupt correspondent banking relationships, impacting crossborder transactions.

> Market perception - clients, partners and stakeholders expect companies to uphold ethical standards and comply with international obligations. Investors, clients and counterparties may lose confidence, adversely affecting business operations.

> Reputation damage - association with sanctioned individuals or entities can significantly tarnish a company’s image, especially through negative media coverage. This kind of reputational harm can have lasting effects, potentially undermining customer trust and affecting business relationships.

> De-risking - companies choose to exit relationships with higher-risk regions or perceived negative business associations to avoid sanctions exposure.

> Risk assessments - companies must assess the risks of engaging with entities indirectly linked to sanctioned parties.

> Operational complexity - compliance with sanctions

“In the current climate, the repercussions for companies that inadvertently violate sanctions through insufficient screening have never been more punitive. Regulatory scrutiny surrounding sanctions is stricter than ever and penalties for non-compliance can cost companies millions of dollars.”

requires constant monitoring of transactions, customer profiles (KYC), and regulatory updates. Ever-changing sanctions lists, divergent jurisdictions, and daily updates. Different jurisdictions have varying sanctions regimes, making compliance burdens multi-faceted and complex.

> Resource intensive – maintaining compliance demands substantial investments in dedicated personnel and technology. Companies must allocate significant resources to navigate the complex landscape of sanctions compliance effectively.

> Enforcement agencies - these bodies intensify scrutiny and investigations to uncover and address sanctions violations. Companies may find themselves under the watchful eye of these agencies, facing rigorous examinations of their compliance practices.

> Legal and regulatory penalties - non-compliance with sanctions regimes can lead to both civil and criminal repercussions. These penalties serve as a harsh reminder of the importance of adherence to international sanctions laws and regulations.

> Secondary sanctions - financial institutions located outside the jurisdiction of the sanctioning country are also at risk. They may incur penalties for engaging in transactions with sanctioned entities, underscoring the global reach of sanctions enforcement.

> Loss of revenue - The inclusion of sanctions exclusion clauses in contracts allows for the suspension or termination of coverage, leading to potential revenue losses. This aspect highlights the financial implications and operational disruptions that can arise from sanctions violations.

HARNESSING TECHNOLOGY

When it comes to mitigating risk, adopting a proactive stance by prioritising compliance from the outset is invariably beneficial.

This necessarily involves conducting thorough due diligence on clients and financial transactions, which should also encompass the examination of vessel data records.

To facilitate this process, financial institutions and insurers can harness existing technologies. These tools enable organizations to take a more forward-looking approach in overseeing sanctions compliance, thereby enhancing their ability to navigate the complex regulatory landscape effectively. Examples include:

> Automatic identification system (AIS) data is used primarily for collision avoidance for marine vessels but can provide information such as identification, location, course, and speed. Primarily land-based receivers limit AIS range to VHF range (20 to 100 nautical miles) make it widely used for real-time ship-to-ship communication. Satellite systems for greater coverage are available at an additional cost. This information allows insurers to track voyages and monitor operating patterns;

> Long-range identification and tracking (LRIT) systems

“When it comes to mitigating risk, adopting a proactive stance by prioritising compliance from the outset is invariably beneficial. This necessarily involves conducting thorough due diligence on clients and financial transactions, which should also encompass the examination of vessel data records.”

are used for world-wide tracking, fitted as a requirement by certain flag administrations (reporting every six hours), using installed shipborne satellite communications equipment. LRIT can supplement AIS and an increased frequency of reports can be requested, particularly when entering highrisk areas, with incremental additional costs;

> The use of synthetic aperture radar (SAR) satellite technology, in conjunction with AIS data, becomes particularly valuable in scenarios where AIS signals are either deliberately deactivated or subjected to manipulation through spoofing techniques;

> Optical satellite imaging is often used in insurance in property risk modelling and could also enhance AIS data in specific areas of concern. Recent innovation and investments into space technology have resulted in significant advancements in cost, scale, and data processing speeds of technologies such as SAR and RF (Radio Frequency) signal mapping - all designed to address the blind spots;

> Behavioural analytics. By combining data sources,

current processes for detecting potential breaches of international sanctions can be improved. It can reveal a great deal about fleet activity and movements, particularly near or within high-risk jurisdictions. Machine learning (ML) algorithms are also available; and,

> Real-time alerts activity related to potential sanctions breaches, entry to geo-fenced high-risk areas or boundaries, ship-to-ship transfers, AIS signal loss, vessel draft changes or suspicious behaviour (loitering, stopping, etc.).

TERMINATION OF COVER OR SERVICES

Because of the heightened regulatory environment surrounding trade and economic sanctions compliance, it is imperative that insurers require their clients to also perform proper due diligence prior to any contract initiation.

Non-compliance with a flag state’s registration prerequisites can jeopardize a ship owner’s insurance coverage under the rules of their Protection & Indemnity (P&I) club.

Furthermore, engaging in “imprudent or unlawful trading,” such as violating sanctions or obscuring a vessel’s location by tampering with or disabling AIS data transmissions without a valid reason, may also serve as a basis for denying insurance coverage.

A notable P&I club has warned that they have introduced sanctions-related provisions that allow them “to suspend or terminate cover in the event that a situation arises where the company believes could cause reputational damage to the insurer.”

Additionally, the club has expanded its sanctions exclusion clauses, empowering it to pause or end insurance coverage with immediate effect should a transaction potentially place them at risk of encountering sanctions, prohibitions, or other adverse measures “on such notice as [they] may decide if a transaction exposes them to the risk of being subject to any sanction, prohibition, or other adverse action” in this regard.

ENFORCEMENT

Financial institutions and insurers may find themselves dealing with breaches of sanctions by their clients, which can come to light through various channels.

These include investigations by the United Nations (UN), reports from the media, enforcement actions by state authorities (for example, media releases by the Office of Foreign Assets Control (OFAC) or entries on the Specially Designated Nationals (SDN) lists), or because of legal proceedings, with evidence disclosed in court transcripts.

Often, the discovery of such breaches is facilitated by international cooperation and surveillance efforts, highlighting the global scope and collaborative nature of monitoring, and enforcing sanctions compliance.

The UN Security Council (UNSC), in collaboration with certain member states, has intensified

surveillance efforts in the Asia-Pacific area. This initiative aims to monitor maritime operations indicative of attempts to circumvent sanctions imposed on North Korea (DPRK).

Due to this increased scrutiny of naval movements in the East China Sea, Yellow Sea, and East Sea, surveillance operations have been successful in spotting and identifying vessels involved in unauthorized activities.

These include both North Korean ships and those flying the flags of other nations, demonstrating the global effort to enforce sanctions and prevent evasion.

The panel of experts, tasked with overseeing the enforcement of sanctions against North Korea, has documented the activities of various vessels and the entities connected to them.

This comprehensive data is made available to the public, ensuring transparency and accountability, and has been shared with appropriate maritime regulatory bodies.

Using photographs and satellite imagery, the extent of involvement by shipowners, charterers, or brokers in evading North Korean sanctions is brought to light.

Furthermore, these documents sometimes reveal connections between these maritime operations and transnational organised crime networks, highlighting the lengths to which certain parties will go to circumvent international regulations.

These methodologies include concealing the ship’s identity by covering or falsifying their IMO number and name. Ship movements are concealed by turning off the AIS transmitter to avoid tracking databases.

These deceptions are intended to conceal their identity and hide illicit transfers of coal, oil, and fuel cargoes during ship-to-ship transfers at sea with North Korean vessels and foreign-flagged or stateless vessels that may even have been designated for earlier prohibited activities.

In some cases, this has resulted in the withdrawal of flag registration, certification, and insurance services. Some ships have subsequently been detained at their next port of call under the auspices of a global port entry ban or asset seizure for activities prohibited by the UN resolutions.

In other instances, these investigations have led to the subsequent designation of owners, operators, and individuals – subjecting them to asset freezes and travel bans or mentions in UN reports in investigations of sanctions circumvention.

Financial institutions and marine insurers must navigate the intricate landscape of international sanctions, by adopting a proactive approach, investing in compliance measures, effective risk management, and staying informed about evolving sanctions regimes to mitigate risks effectively.

The consequences of non-compliance can be severe, impacting both financial stability and institutional reputation. Staying informed and proactive is essential for continued success and integrity.

The 2024 event will once again focus on upstream oil & gas and have a heavy focus on energy transition and renewables. Energy Insurance London is specifically designed to bring together all the key players in the energy insurance market to discuss, debate and offer actionable insights into the issues affecting the sector.

This year we are incorporating a new format, with conference-wide Roundtable Discussions taking place after lunch covering a broad range of topics.

As part of our ongoing efforts to support the Lloyd’s Marine & Energy Under 35’s Club, we are also offering 50 broker and underwriter members complimentary passes to the conference (allocated on a first-come, first-served basis).

07.45-09.00: Registration and Refreshments

08.55-09.00: WELCOME ADDRESS:

Grant Attwell, Managing Director, Cannon Events

09.00-09.40: KEYNOTE ADDRESS: State of the Market – Renewables/Oil & Gas

This session will be dive into the state of both the traditional oil & gas markets as well as the renewables sector. We will look at how the market has developed from the frenzy of 2023 and compare the two sectors in terms of available capacity, terms and conditions, as well as deductibles. We will also consider the impact of rising interest rates on the mid-stream market and its ultimate impact on insurance. We will explore the available reinsurance for both sectors and ask what the future might hold for 2024 and beyond.

09.40-10.20: PANEL DISCUSSION: Running Out of Water – Climate Change Becomes Reality

With more than 40% of the global population or more than 4 billion people, going to the polls this year, there is a widespread expectation of a massive shift in government attitudes towards green energy versus traditional oil and gas. In the UK, Rishi Sunak has pledged support for gas in a bid to ensure energy security into the future. This session asks whether governments are placing energy security over green energy and what that will mean for the insurance sector.

10.20-10.40: PRESENTATION: Changing the Wordings on War Risks

The London market has developed new wordings to address war, terrorism and strikes, riots and civil commotion (SRCC). In this session we explore how those new wordings will be used and the logic behind their development. We will look at the risks of targeted attacks on energy infrastructure and consider the global risks facing the energy market from Russia and Ukraine to China and Taiwan.

10.40-11.10: COFFEE AND NETWORKING BREAK

11.10-11.30: PRESENTATION: Carbon Sequestration –Capturing the Carbon and Keeping it Captured

Those offering carbon capture have the benefit of tax credits from governments keen to achieve their Net Zero goals. However, there is a real risk to these companies if the CO₂ were to escape and the credits effectively disappear into thin air. Can the insurance market step up and provide innovative solutions to reduce that risk? We examine the opportunities for the industry.

11.30-12.10: PANEL DISCUSSION: Infrastructure/Supply Chain Disruption

While claims might be an inevitable part of the insurance cycle, business interruption has become an ever-larger proportion of claims. As renewable technology changes rapidly, so the emergence of serial defects is beginning to hamper the sector. Combined with supply chain disruptions, insurers are seeing claims for much longer periods of downtime. The question for the market is whether insureds are buying enough cover. Should the one-year BI period be extended to two years, for example.

12.10-12.30: PRESENTATION: Exposure Management

12.30-12.50: PRESENTATION: Joining the Dots: Interconnectors

Interconnectors enable countries to share renewable energy and, right now, there is a boom in development. This session asks what this means for insurance and the risks that these systems carry. How does war and terrorism risks impact the appetite for this market and what are the other risks, such as damage? How closely does the insurance industry work with government in terms of the security risks?

12.50-13.40: LUNCH BREAK

13.40-14.50: ROUND TABLES: Serial Defects, Offshore and Distribution, Onshore Cabling, Net Zero, Exposure Management, Battery Storage, Environmental Liability, Re-Insurance, Hydrogen, LNG Exports, Energy Security & Green Agenda, Oil & Gas, Wind Turbine Size.

15.30-15.50: COFFEE AND NETWORKING BREAK

15.50-16.10: PRESENTATION: Ghost Fuels or Future Solutions – From Biofuels to Hydrogen

Renewables are not just about offshore wind, there are plenty of other sources of renewable energy being developed and deployed. This fireside chat will explore some of those from tidal technology and floating offshore wind or solar to hydrogen and biofuels. We will investigate some of the risks and ask how insurers should prioritise using their capacity between these many alternatives.

16.10-16.30: PRESENTATION: How to Measure Carbon Emissions

With such emphasis of the Net Zero goal, it can be hard for insurers to truly measure the emissions related to their books of business. And with Lloyd’s insisting insurers accurately measure emissions, the sector has to develop solutions. This session will highlight not just the obvious carbon related risks being underwritten but the need for the whole portfolio, including covers like D&O, to be properly accounted for.

16.30-17.10: PANEL DISCUSSION: Claims Trends –Renewables and Oil & Gas

Given the size of the risks insured, the energy insurance market has always been a subscription market, with multiple insurers in different regions of the world. However, the differing views and approaches of those included on the same slip, and the proliferation of placements on more than one slip, have resulted in challenges in communication and claims handling. Is it possible to have greater transparency and consistency? And is it necessary? This session will explore recent claims and the way in which the market has handled them.

17.10-18.00: Drinks Reception

Steady as she goes…

Pressure to provide broader coverage is growing after a couple of good years for the marine cargo insurance market, but the standard wordings that have been brought in have benefited everyone argues Aimee Nolan , Cargo Line Underwriter at Hiscox London Market

Following several years of remedial work, which saw the greater use of more standardised wordings as well as pricing corrections, the London cargo market is in a much stronger and more sustainable position.

But, as with all market cycles the pressure to provide additional or broader coverages is beginning to grow.

London is the global centre of excellence for marine cargo and stock. It’s a vibrant and energetic market, full of talented brokers and underwriters who are working hard to win new business while doing everything they can to retain existing accounts.

Often, the best way to differentiate yourself from the pack, without compromising on price, is by offering some flexibility on terms. The arrival of new entrants or returning players, bringing new capacity with them, has added further pressure.

But while the cargo market has been on an even keel recently, we don’t have to wind the clock back too far to get a painful reminder of what could happen.

2018 was the culmination of the cargo market’s longest soft market cycle in memory. In the preceding years, wordings had become increasingly broad, with policies often containing a variety of additional coverages clauses and large sub-limits.

The market often did not charge extra for these additional coverages, and their implication on aggregates was not fully realised until a succession of large losses struck.

Lloyd’s put the class into special measures. Coverage was pared back, policy limits were reviewed and rates increased between 60% and 100% in the next 18 months. We saw some

London insurers pull out of the class, taking their capacity with them.

PERIOD OF INTROSPECTION

It was a challenging time, but it did us some good, it forced us all to take a step back and reflect on what the cargo market is here for.

We went back to basics and focused on those perils which keep our clients awake at night: natural disasters, large fires, a vessel sinking or a hijacking. Other risks, such as personal property and BI, would be better covered in those specialist markets.

That moment of introspection showed that good can come from a difficult experience.

Since then, underwriters and brokers have forged much closer links. The Joint Cargo Committee (JCC) now works closely with the London and International Insurance Brokers’ Association (LIIBA) to draw up standard clauses that both sides are happy with.

TEAM EFFORT

That new spirit of co-operation was illustrated when the JCC, in collaboration with LIIBA, developed new standard definitions for natural catastrophes and included aggregation language for tornadoes.

It was widely acknowledged that the move wasn’t prompted by underwriters clawing back more cover after a big loss, but that there was a need for more technical pricing for these large risks, and tighter wordings for clarity.

The benefit of having standard clauses is that everyone knows where they stand. Customers know what they are buying, brokers know what they are selling, and underwriters understand how much they need to pay out if there is a loss.

Now, with two strong performance years behind us, as well as increased capacity from new and existing markets, the dynamic is changing. While we acknowledge that there is a market cycle and this is the next phase of it, it would be a shame for the hard learnt lessons from the past to be forgotten.

That would not be to anyone’s benefit, especially our customers. While the inclusion of additional or broader coverages and bespoke wordings would mean more of a company’s everyday business risks are covered, they are not always standard cargo perils.

The inclusion of such risks in cargo policies, can mean that claims become more complex to adjust, meaning it could take longer for clients to be paid at exactly the time when their cashflow may be under the most pressure. And, just as we saw in 2018, it could prompt a harder reaction if the market has to adjust non-core claims deteriorating the figures.

So, I would argue that steady as she goes really is the best course for the London cargo market.

“We

went back to basics and focused on those perils which keep our clients awake at night: natural disasters, large fires, a vessel sinking or a hijacking. Other risks, such as personal property and BI, would

be better covered in those specialist markets.”

Aimee Nolan, Hiscox

Cargo accidents are an unfortunate reality in the global supply chain. From physical damage to water infiltration and contamination, the risks are diverse and result in businesses and consumers feeling frustrated. When such incidents occur, the immediate response often involves replacing the damaged items. However, this approach often incurs additional costs. To mitigate these risks and preserve valuable cargo, it is essential to understand and implement effective damage assessment strategies.

Guido Gavio, Asia Complex Loss Director, BELFOR Restoration Services explains the value of cargo damage assessment strategies

Cargo accidents happenwhat next?

Cargo damage comes in various forms: physical damage from impact or crushing, water intrusion leading to corrosion or mould and contamination that renders products unusable. Where cargo is particularly vulnerable to damage during transit, the right in-situ damage assessment becomes even more critical.

There are two primary categories of goods that require special attention in this regard: boxed equipment, including massproduced items such as consumer electronics and white goods, as well as high-value commercial or industrial individual items.

IN-SITU ASSESSMENT

Restoration companies such as BELFOR Restoration Services

TYPES OF ACCIDENTS BELFOR HAVE DEALT WITH:

l Cargo Fires

l Accommodation Fires

l Engine Room Floodings

l Engine Room Fires

l Chemical Spills

l Ship Collisions

specialize in assessing the damage and when possible restoring damaged cargo across the Asia Pacific region. They offer expertise in various scenarios, including:

• Segregating damaged items: Identifying and isolating affected goods from unaffected ones, to avoid cross contamination hence preventing further damage. It also assists with providing factual information to made the right decisions;

• Recommending mitigation measures: Based on the damage type and extent, restoration specialists suggest appropriate actions to minimize losses and expedite recovery;

• Testing unaffected items: Testing can be suggested to ensure the functionality and safety of seemingly undamaged goods, preventing potential problems downstream; and,

• Recommending options for affected items: Depending on

“With the right expertise and a collaborative spirit, even seemingly devastating cargo incidents can be turned into opportunities for recovery, responsible resource management, and a more resilient supply chain.”

the severity, restoration specialists propose repair options, salvage possibilities, or responsible disposal methods.

LOSS TO OPPORTUNITY

A shipment of 1,440 LCD displays traveling from Taichung to Shanghai encountered a storm, causing containers to topple over. The initial assumption was a total loss.

However, BELFOR’s assessment revealed a different story. After segregating damaged displays, they conducted chemical and functional tests on unaffected ones. Ultimately, only 98 displays were deemed unusable, while the rest were successfully salvaged, saving the insured party more than US$387,000.

In another incident, an X-ray scanner destined for Nepal fell during offloading, leading to a presumed total loss. BELFOR, however, disagreed. They recommended a more thorough assessment at the original equipment manufacturer’s (OEM) facility. Detailed dismantling and component testing revealed repairability. The scanner was fully restored and delivered, saving significant costs and ensuring crucial security equipment reached its destination.

BENEFITS BEYOND RECOVERY

Using the right approach to cargo damage assessment offers significant advantages.

First there are time and cost savings. Compared to replacements, restoration can significantly reduce downtime, returning businesses to operation weeks or even months faster. And second there is sustainability. Recovering equipment and machinery minimizes waste and environmental impact, contributing to a more sustainable supply chain.

COLLABORATIVE APPROACH

Cargo damage assessment requires careful planning and collaboration. A clear assessment plan, agreed on by all stakeholders, ensures transparency and efficiency. The approach should be tailored to the specific incident considering the type of damage, circumstances, and nature of the cargo. With the right expertise and a collaborative spirit, even seemingly devastating cargo incidents can be turned into opportunities for recovery, responsible resource management and a more resilient supply chain.

The end of data-darkness

Andy Yeoman , CEO of Concirrus, explores the risks associated with global cargo aggregations and concerns about levels of exposure for insurers

The world has become used to a complex and fragile global supply chain, highlighted in recent years with the pandemic, global tensions, and major shipping events such as the blockage of the Suez Canal for six days by the Ever Given and more recently, the unfortunate events in the Red Sea. And, with decades long adoption of just-in-time logistics, there is little resilience built into the supply chain.

Some 30% of global container traffic uses the Suez Canal and the events such as the Russia-Ukraine and Gaza-Israeli conflicts have caused detours adding circa.6,000 nautical miles to their journey around the Cape of Good Hope.

This itself adds cost, complexity, and additional risk to supply chains that are ordinarily under huge amounts of economic pressure, and this is exacerbated by these geopolitical events.

VISIBILITY OF RISK

Insurance is a complex and ever-evolving industry, with different challenges affecting different areas of risk. In an age where we are used to information at the touch of a button or swipe of a screen, one of the key challenges marine insurers have faced is a lack of visibility of the cargo risks they are writing.

In most cases, they simply cannot calculate what their aggregations are, what is on the vessel, in a port or held in storage locations.

This is where new datasets combined with emerging technology can fill that gap.

Data is now available that allows us to understand where a given shipment is, its intended route and when it should arrive. Having this information on every shipment is invaluable but presents an additional new challenge in itself: “How can we process that data in order to extract its value?”

Realistically, insurers do not need that volume of data, they simply need the answers that the data provides.

This is where analytics and artificial intelligence (AI) play a

vital role in answering insurers’ questions both from a macro and a micro level; anything from ‘where’s the vessel’ to ‘what would be the exposure in my portfolio to an event in a given port?’

Without this information, insurers are exposed to the vagaries of the market and unable to answer questions around what the aggregation is for them, or what the reserves need to be. Accuracy is vital and using the most in-depth, up-to-date data to inform risk increases accuracy and allows appropriate risk transfer mechanisms to be used.

In all cases, (re)insurers need to put in place appropriate reinsurance and in the event of an incident, set aside reserves. In the absence of accurate information, they may need to reserve to a worst-case position which ties up valuable capital.

Now however, an accurate assessment can lead to a reduction in reserves and release more working capital into the business.

BUILDING THE BIGGER PICTURE

To build a global view of cargo requires the bringing together of vast, differing datasets built from hundreds of thousands of logistics companies, carriers, etc. Bringing this data together to

“An accurate assessment can lead to a reduction in reserves and release more working capital into the business.’’

Andrew Yeoman, Concirrus

build an insightful picture is a significant integration challenge.

Data in different formats or structures needs to be unified, analysed and presented in a way that is useful and that is where Concirrus’ tools are invaluable.

Using AI and a huge amount of computing power, we can digest, analyse, and present the data in a structured and useable

way. This gives immediate, accurate answers to insurers freeing up their valuable time to focus on other priorities.

When we talk about shipping aggregations, we are currently talking about on vessel and in-port. The next step is how to get that same visibility for non-port aggregations in storage locations.

As goods move by road or rail from the factory to the origin port, are loaded onto the vessel, unloaded at the destination port and travel to the customer warehouse, that same visibility needs to apply.

Without this visibility, the underwriting and risk management process remains laden with assumptions, and where there are assumptions, there is an impact to the insurer.

TURNING ON THE FLOODLIGHTS

The best analogy for the cargo market is that when it comes to aggregations, insurers have been working in pitch black for years. Now we are shining a spotlight into the market but, ultimately, we’ll need a floodlight.

Concirrus’ insight increases what’s traditionally been available, but to have full visibility in the market requires even more data and analytics.

The good news is that as shipping customers’ demand for information increases, so does the information available to insurers.

Logistics companies are all searching for a competitive edge and part of that will be the cost of insurance, so those that cannot provide information will be adversely priced.

It will quickly come down to the fact that providers offering in-depth data of a shipment’s current stage, location and most up-to-date ETA will be favoured over those who cannot offer such level of detail and information.

Ultimately, our goal is to provide real-time visibility to 100% of the cargo and container industry from end to end. We want to bring a truly impactful change to the market and be able to offer all the relevant data on a particular business to insurers before they write their policy, so they are as well-informed as possible and able to write accurate risk.

Having comprehensive information about sendings enables insurers to accurately assess and price risks, manage aggregations, and take mitigating actions.

The key to changing our current ‘spotlight’ on data for the industry into a ‘floodlight’ is collaboration. Collaborating and sharing data is key to a new way of working across the entire cargo industry and ends the 300-years of data-darkness in cargo insurance.

30 May 2024, Athens under the auspices of Posidonia 2024

30 May 2024

The Marriott Hotel, Athens

Marine Insurance Greece, under the auspices of Posidonia 2024, is a new event being held on the 30th May at The Marriott, Athens. The program will be focused on bringing brokers, insurers and third parties together with the Greek shipowner community to discuss all aspects of marine insurance. There will be a Welcome Party sponsored by Polygreen S.A. at DOT Beach Vibes, Athens on the 29th May.

Registration prices:

€500 Marine Brokers or Insurers

€750 Services providers to the marine insurance industry Complimentary Delegate Pass for Ship Owners

Greece

30 May 2024, Athens under the auspices of Posidonia 2024

Wednesday 29th May: 19.00-22.00

Polygreen S.A. are pleased to sponsor the Welcome Party for the inaugural Marine Insurance Greece. The party will be held at DOT Beach Vibes bar in Athens. All delegates are warmly invited to attend.

Thursday 30 May 2024, Athens

09.25-09.30: WELCOME ADDRESS: Conference Chairperson: Dimitris Monioudis, Managing Director, Rethymnis & Kulukundis Ltd

10.00-10.30: PANEL DISCUSSION: State of the Market – Brokers

This session will analyse the current state of play for the brokers operating in Greece and look at the changing demand for their services. It will also consider the hull market and look at why Lloyd’s has lost out to Scandinavia in the Greek market.

Moderator: Illias Tsakiris, Chief Executive Officer, Hellenic Hull, Chair Ocean Hull Committee, IUMI

Panellists: Manos Lorentzos, Director, Seascope Hellas S.A., Manos Sofronis, Chief Executive Officer, OneGlobal, Ludvig Nhylen, Area Manager Team Greece, The Swedish Club

10.30-10.50: PRESENTATION: Compliance – Sticking to the Rulebook is a Costly Business

The cost of compliance is increasing steadily, as new regulations and greater enforcement are forcing all in the shipping sector to adopt new practices, including insurers and brokers. We examine the scale of the problem and how can it be solved.

Presenter: Karen Seifert, Assistant United States Attorney, The United States Department of Justice

10.50-11.20: COFFEE AND NETWORKING BREAK

11.20-12.00: PANEL DISCUSSION: Alternative Fuels –Future-Proofing the Greek Shipping Industry

As new fuels come on board, the whole shipping industry is likely to be in a state of flux and at the same time, adapting to a new working environment. This includes bunkering. In this session, we will consider whether Greece is ready to embrace the changes ahead and develop new infrastructure. How will it make the choices between new fuels from ammonia, methanol, LNG, nuclear, wind, etc? Will insurers have the appetite for all these fuels, or for the infrastructure development?

Moderator: George Margetis, Chief Executive Officer, Margetis Maritime Consulting

Panellists: Ian Clarke, Head of Claims and Regional Director, West of England P&I, Nikolas Tsatsaros, Strategic Business Partner- New Construction, Lloyd’s Register, Panos Zachariadis, Technical Director, Atlantic Bulk Carriers Management Ltd

12.00-12.30: BEACHSIDE CHAT: Salvage: Not all in a Day’s Work – The Changing Landscape for Salvors

New fuels mean new challenges for all those who handle them including the crew, but also, crucially, salvors. The session will ask whether salvors need to have separate skill sets for each new fuel type and how that would work in practice. We also consider the implications of sanctions on salvage, from immediate rescue to long-term recovery.

Participants: Turker Yildrim, Partner, Esenyel Partners, Lawyers & Consultants, George Tsavliris, Principal, Tsavliris Salvage Group and Non-Executive Chairman, Oneglobal Insurance Broking Ltd, Elias Psyllos, Vice President, TT Salvage

12.30-13.10: PANEL DISCUSSION: Crew – Teaching an Old (Sea)Dog New Tricks?

Crew today face many challenges, first and foremost the decision of whether to go to sea at all. With an ageing workforce, shipping companies are facing new challenges, too. Can the crews be trained to work with the emerging technologies? Are older crew resilient enough in the face of piracy or terrorism?

Moderator: Dimitris Monioudis, Managing Director, Rethymnis & Kulukundis Ltd.

Panellists: Ian Teare, Partner, Hill Dickinson, David Nichol, Master Mariner, Senior Advisor, Loss Prevention and Claims, The Swedish Club Greece, Alkmini Biskanaki, Assistant Claims Consultant, Shipowners P&I Club, Kostas Katsoulieris, P&I Claims Director – Greece, NorthStandard

13.10-14.10: LUNCH BREAK

14.10-14.30: KEYNOTE ADDRESS: Managing Emerging Risks

Presenter: Patrick Davison, Head of Underwriting Performance, Lloyd’s of London

14.30-14.50: PRESENTATION: Emissions Trading System

(EU): Leaving Your Footprint Behind – Carbon Trading

The challenge of how to reduce any company’s carbon footprint is often solved through carbon trading systems. Europe established its own emissions trading system and it has generally been accepted as successful, however the question remains as to whether the system is a success when it comes to the shipping sector. How has it impacted the relationship between charterers and owners?

Presenter: Eleni Antoniadou, Lawyer Defence, Gard (Greece) Ltd

14.50-15.30: PANEL DISCUSSION:

War Risks Emanating from the Red Sea

The red sea is becoming a no go area for a lot of shipping companies despite pleas from charterers. How is the situation in the Red Sea affecting Greek shipping companies and their insurers?

Panellists: Nicholas Berketis, Manager, J.Kouroutis & Co. Ltd. Insurance and Reinsurance Brokers, Seán Geraghty, Regional Director, Thomas Miller BV Greek Branch

15.30-15.50: COFFEE AND NETWORKING BREAK

16.10-16.30: PRESENTATION:

Anchoring Power: The Rise of U.S Authorities as Global Enforcers of Sanctions in the Shipping Industry

As the United States asserts its authority on a global scale, leveraging sanctions as a primary tool of foreign policy, the shipping industry finds itself navigating increasingly turbulent waters. Drawing upon recent developments, a fundamental question arises: are stakeholders in the shipping industry mere pawns caught in the crossfire of superpower rivalry?

Presenter: George M. Chalos, Chalos & Co, P.C. - International Law Firm

16.30-17.10: PANEL DISCUSSION:

Closing in and Closing Down – Supply Chain Disruption

Shipping is facing myriad challenges, particularly when it comes to route planning. This session will look at these risks and also discuss some of the scenarios for claims to arise from them. We also consider the impact this disruption has on Greek ports.

Moderator: Yannis Triphyllis, BoD, UK Defense Club

Adapt or perish

An adaptable workforce is important. An adaptable technology strategy is equally so, argues Ronny Reppe, CEO, Noria Software

We are often told about the importance of adaptability in employees and teams, but I would argue that having an adaptable technology strategy is equally vital.

I’m fond of the phrase “the new normal”. The term encapsulates an understanding that normality has shifted from predictability to a situation where rapid change has become the norm.

Organisations are having to adapt very quickly to challenges including disruptive tech, geopolitical events and changing weather. Without adaptability, your organisation simply cannot hope to survive, let alone thrive.

It is unsurprising, therefore, that adaptability has become a buzzword as we enter the middle of the decade. Ernst & Young nominated an adaptable workforce as the key for managing change. McKinsey described adaptability as an “evergreen meta-skill”, while Forbes recently urged leaders to make adaptability “mission critical” in 2024.

Yet, all of these commentators see adaptability in terms of

an organisation’s people strategy. For them, it is a skill to nurture within the business and a trait to prioritise when hiring new employees.

I believe that adaptability in people is only half of the puzzle. Organisations also need to embrace adaptability in their technology strategy if they hope to ride the never-ending wave of change.

RIGHT CHOICES

Adaptable technology is not about a specific type of tech. Rather, it is about making the right technological choices, not getting locked in, and being able to pivot fast to respond to changing user requirements and other impactful events.

I see it as a mindset that guides people to choose the right way of implementing technology, which is becoming critically important in the age of machine learning and artificial intelligence.

Crucially, you must be able to change the way you operate without disrupting business continuity. This cannot be done without an adaptable technology strategy that slashes the time from idea to launch.

Incorporating business continuity management (BCM) into your adaptable technology strategy will strengthen your organisation’s ability to protect critical processes, navigate transformation with confidence and maintain operational stability during disruption.

CONFIGURABLE SOFTWARE

An example of the adaptable technology mindset in practice can be found in the rise of configurable software. Self-configuration refers to a user’s ability to modify and customise a system’s appearance and functionality using a system’s built-in administrative options, without the need to modify the underlying code.

Whether it involves creating custom reports, adjusting user roles and permissions, or simply changing the look and feel, users can easily perform these actions without needing to engage the vendor’s development team.

Opting for a self-configurable tool offers several advantages including cost savings, time savings, greater control over the system’s appearance and functionality, as well as flexibility. Typically, a user can start with basic functionality and expand with additional features in time, adapting to evolving requirements.

ADAPTABLE TECHNOLOGY

What sorts of benefits can an adaptable technology strategy enable? From a business perspective, this approach means you can change your products, behaviour, how your customer consumes and perceives your product, how you distribute the product, then how you report and monitor success. There is potential to change from every perspective.

From strategy to operations, customer interaction to management, an adaptable technology strategy has the potential to transform how changes are executed and monitored. Some of its features

““Adaptability in people is only half of the puzzle. Organisations also need to embrace adaptability in their technology strategy if they hope to ride the never-ending wave of change.”

may include:

> An ability to flip out tech stack components as required with minimal time and effort – this is particularly important when organisations need to scale up and down in response to market conditions;

> Configurable parameters that enable the customer to change the product themselves without coding. Bypassing the need to request changes from the product vendor is a core strength of adaptability and saves organisations significant time and money;

> Gaining flexibility in terms of customer interaction and being able to quickly change the digital customer journey; and,

> Having real-time, deep insights into your data to monitor the success of every technological change and enable tweaks as necessarily.

Let me stress the importance of regularly monitoring the progress of digital transformation initiatives and evaluating their impact on your business continuity. Implement feedback loops to identify areas for improvement and make necessary adjustments to your transformation plan as needed.

LEGACY SYSTEMS

Do not make the mistake of underestimating the frustration that stems from legacy technology that takes too long to change. Immature businesses struggle towards technology because it always takes time to build, test, launch and fix.

It can take years to launch a new product for legacy systems or make a major tweak to existing functionality, but the future will require organisations to do so in months, not years.

If your organisation, which is eager to take on challenges, is burdened with a legacy system that is expected to take years to change, it will inevitably erode motivation and diminish the employees’ drive to implement broader changes.

In other words, a lack of adaptability in your technology, perhaps more so than a change-resistant workforce, can be a significant hurdle to implementing your ideas.

EMBRACE ADAPTIVE TECHNOLOGY

Equip yourself to face uncertainty. Embrace an adaptable technology strategy that empowers your organisation to swiftly respond to evolving needs and seize new opportunities. Break free from the shackles of legacy systems that hinder progress. Incorporate configurable software, leverage real-time insights and prioritise business continuity to safeguard critical processes. Finally, ensure that any investment in “people adaptability” is matched by a shift towards adaptable technology.

The challenge of alternative fuels

Alternative fuels are becoming increasingly important in the maritime sector as it looks set to sustain its future predicts

Stephen Harris , Senior Marine Technical Consultant, Marine, Cargo & Logistics Practice, Marsh

The COP28 summit closed with a deal to transition away from fossil fuels for the first time, signifying a critical moment for global climate negotiations. While the COP agreement does not directly reference shipping, it calls for hard-to-abate sectors to accelerate the adoption of alternative technologies and fuels. In addition, from January 2024, the EU’s Emissions Trading System (ETS) was extended to cover carbon dioxide emissions from all large ships, steering the sector towards progress in its decarbonization efforts.

The commercial maritime industry is a vital part of the global economy, transporting more than 80% of goods around the world. According to Clarksons’ data, global fleet tonnage has increased by 97% since 2008 and maritime trade continues to grow at around 3% yearly.

Currently, the majority of engines that drive the world’s traditional commercial vessels are fuelled by fossil fuels that include marine diesel oil (MDO), intermediate fuel oil (IFO), and marine gas oil (MGO). In 2021, more than 93% of vessels at sea (by tonnage) ran on these fuels. Developments are underway as the sector considers the use of alternative fuels.

WHAT ALTERNATIVES?

Alternative fuels include methanol, liquefied natural gas (LNG), liquefied petroleum gas (LPG), biofuels, ammonia, hydrogen, electric, wind, sail and nuclear power.

In some cases, these fuels may be used as a “dual fuel” mixed with a small amount of traditional fuel to improve their ignition performance. Each fuel has advantages and disadvantages, presenting scientific and commercial challenges and risks for vessel operators, charterers and insurers.

Several alternative fuels are carbon-based, such as methanol and LNG. While such fuel types may produce fewer emissions compared to traditionally fuelled ships, they are generally viewed as a temporary, transitional solution, whereas non-fossil carbon-based sources, such as biomass, may be more sustainable.

Vessels that continue to use carbon-based alternative fuels will face emission charges. Under the EU’s ETS, carbon credits must be purchased to pay for emissions created by carbon-based fuels during voyages within as well as to/from Europe from elsewhere in the world.

Some non-carbon-based alternative fuels such as ammonia and hydrogen need to be blended with small amounts of traditional fuel during the combustion process (as dual fuels) to spark engine ignition and, therefore, will also require carbon allowances.

HIGHER COSTS?

Furthermore, the cost of many alternative fuel types will likely be higher than traditional fuel oil initially. This concerns many vessel charterers, who are usually contractually obliged to pay for the fuel consumed while the vessel is under charter.

Additional concerns relate to supply. If a vessel is designed or retrofitted to run on an alternative fuel type, there must be adequate global fuel supplies and refuelling infrastructure wherever that vessel trades.

It is unlikely that all alternative fuels will be adopted and/ or supplied globally. A shipowner who chooses a fuel type that few others in the industry adopt may find it challenging to secure adequate supply of that fuel. This could also impact the vessel’s resale value if purpose built or retrofitted for a particular fuel type.

If the supply of a fuel type is unavailable, commercial vessel engines and alternative rotor propulsion systems (such as a Flettner rotor sail propulsion system, which could reduce a ship’s energy consumption) may operate using a mixture of different fuel types. However, a vessel running on more than one fuel has its own challenges, such as different storage and conditioning systems.

RISKS FOR INSURANCE COVER

The operation of alternative fuel-powered vessels may present risks that have not yet been fully quantified and assessed by insurers and/or underwriters.

Hydrogen is mainly untried and untested in a marine environment. Nuclear-powered commercial cargo vessels could be a technically viable alternative to traditional sources of energy, however, there are some concerns regarding the safety of nuclear material sailing internationally through the open seas.

While electric vehicles are fast becoming a reality for millions of people around the world, whether batteries can power large commercial vessels at sea and for long periods of time is still unclear. The emissions generated during the production of batteries required to power a large commercial vessel are also a matter of concern.

Ammonia can be toxic and highly caustic if not handled correctly, posing a hazard to crews, marine life, and the engine.

Ammonia, LNG, and hydrogen require energy to be kept at very low temperatures in a liquefied state (eg, ammonia at –33⁰C, LNG at –162⁰C, and hydrogen at -273⁰C) and, as such, may present additional loading and storing challenges.

New fuel types may also challenge storage facilities in some ports from a security and physical damage perspective. How these alternative fuels will perform under harsh maritime sea conditions over lengthy periods is also largely unknown.

DEVELOPING SOLUTIONS TOGETHER

There is much to be excited about, but also uncertainty surrounding the performance and safety of many alternative fuels, meaning the marine insurance market may take a cautionary approach.

Insurers may look to manage and/or limit their exposure to losses arising from the use of alternative fuels in a number of ways, for example through the imposition of policy terms such as warranties, sub-limits, and/or exclusions.

The insurance industry has a significant role to play in supporting the maritime industry as it looks to invest in new technologies, considers alternative ways to operate going forward to reduce greenhouse gas emissions and transitions to a lower-carbon future.

“As the maritime industry continues on its journey towards a lower-carbon future, we must remain committed to supporting clients in adopting new technologies and sustainable practices to ensure a resilient and environmentally responsible maritime sector.”

Marcus Baker, Global Head Marine, Cargo & Logistics, Marsh

Not just rust…

incidents investigated by Hawkins include: corrosion of steel cargo, hull corrosion and wire rope damage.

Dr Philippa Moore , Materials Expert at Hawkins & Associates, gives a forensic investigators view of corrosion in steels

What do I see when I look at rusty steel? Lots… and potentially much more if I can take samples to examine in the laboratory.

At any scene where something has broken, exploded, leaked, or injured someone, and I have been asked to find out ‘What happened?’, I often find that materials science will lead me to the root cause of the failure.

As an engineer specialising in steel structures, metals and welds, this often means there will be some kind of corrosion.

In shipping, corrosion damage can be a significant factor in the claims managed and some examples of common types of

Rust and corrosion are a natural consequence for steels and corrosion must be kept at bay through the constant application of corrosion protection methods.

For a ship’s hull, deck and machinery, the most commonly used methods are paints and coatings, often used in conjunction with sacrificial anodes for cathodic protection below the water line.

For steels used in fluid containment or transport, corrosion inhibitor chemicals can be added to the fluid to prevent internal corrosion.

For cargoes of steel products, keeping the goods dry and protected from rain, sea water or sea spray is vital to maintaining the product quality to prevent rusting during transport, so that they arrive in the best condition to be manufactured into their finished product such as cars, building frame beams or other machinery or structures.

The iron in steel wants to corrode and we need to actively prevent it from doing so for the duration of the service life, while we exploit the strength and performance of modern steels.

BUT IS IT ART?

The first ‘rust’ that forms when iron or steel start to corrode when exposed to moist atmospheric conditions is the bright orange powdery oxide that can be brushed off.

In time another oxide starts to form that is darker bronze or brown colour that forms more evenly over the surface of the iron. While the bright orange coloured oxide is loose and falls off, the brown oxide remains on the surface and provides a more protective patina.

Iron can also corrode in water under low-oxygen conditions to form a black coloured oxide. Steel radiators corrode internally to produce this black oxide, which flakes off to form the black sludge inside heating systems. In principle, once the oxygen in the water inside the closed system has been used up, the corrosion rate reduces.

In cast irons, the brown oxide patina can be sufficiently stable to provide permanent protection from further corrosion. Some iron and steel objects make use of progression of corrosion to deliberately create a ‘weathered’ surface appearance.

Some garden ornaments are intended to rust and give a nostalgic charm to a garden design. So rust is not always a problem and can even be aesthetic.

One of the tempting questions to ask when looking at rust is “How long has it been corroding?”, and/or “How long will it survive?” These are questions that are almost impossible to answer in practice, because the thermodynamics of corrosion depends on a large number of variables, such as:

> exposure to moisture

> exposure to oxygen

> environmental temperature

> steel surface roughness

> condition of paints and coatings

> exposure to chemicals that can accelerate corrosion, such as salt water

So while it is possible to identify that those parts of a fracture surface that have darker brown or black rust will have been exposed to the environment for longer than parts that are freshly fractured, or recently rusting with bright orange rust, it may not be possible to quantitatively say whether that pre-existing damage, for example, has been there for two weeks, six months, or even longer before final failure occurred.

In marine cases, testing the corroded surface with silver nitrate solution can detect the presence of chlorides and help identify whether exposure to sea water has played a part in accelerating the corrosion.

IS LOCALISED BETTER?

Uniform corrosion is not generally a problem; it eats away at iron and steel slowly over time, and a corrosion allowance of a few millimetres on a nominal plate thickness can accommodate it for a 20-year design life of a structure under atmospheric conditions. The problems occur when

corrosion happens in localised areas, or when the corrosion rate is accelerated. The culprit is almost always the chemical environment.

This type of corrosion can occur without the presence of damaging chemicals. In crevices where water can accumulate, oxygen can deplete and a stagnant water chemistry forms inside the crevice that can be very different to the general environment.

This localised chemical environment can cause corrosion rates to accelerate. This is known as ‘crevice corrosion’. The design of a steel structure can help avoid crevices that might be susceptible, but it can commonly occur around welded features, in the corners of shipping holds and at overlapping plates, or bolt holes.

In wire ropes, such as those used in hoisting assemblies, the steel strands can suffer crevice corrosion from water ingress if the rope’s lubricant has not been maintained.

A localised corrosion mechanism that is similar to crevice corrosion, but which can form on the surface of steel is pitting. Pitting occurs underneath little ‘scabs’ of solid corrosion products (like oxides) that form on the steel, called tubercles.

Instead of protecting what’s underneath, they also create a very localised chemical environment that is depleted of oxygen. This localised chemical environment might be sufficient to accelerate the corrosion of the metal surface underneath the tubercle forming pitting that can progress to pinholes in the steel.

Tubercles can form when the initial oxide coating on a metal surface has not formed in a uniform manner. Sometimes tubercles form in closed water systems, such as inside radiators on central heating circuits, when the water treatment has been insufficient to prevent corrosion from occurring.

Another cause is bacteria. Microorganisms inside closed water systems form biofilms over the steel surface and this can result in locations providing ideal conditions for colonies of certain bacteria, with different bacteria thriving in either oxygen-depleted environments or

“The problems occur when corrosion happens in localised areas, or when the corrosion rate is accelerated. The culprit is almost always the chemical environment.”

Dr Phillipa Moore, Hawkins & Associates

the environment is a causative factor.

Mechanisms of environmental cracking include stress corrosion cracking (SCC), and sulphide stress cracking (SSC) in steels. Stress-driven cracking mechanisms require the critical combination of the susceptible alloy, its corrosive environment, plus the application of stress.

But this stress could be residual stress from welding, or the effect of stress concentrations at machined threads or changes of section, in addition to the applied stresses inherent to the application. Environmental cracking is one of the most damaging corrosion mechanisms as it can propagate quickly and cause catastrophic failure of equipment in some cases.

Steels are affected by any corrosion or degradation mechanism that generates atomic hydrogen inside the steel. Hydrogen atoms are highly mobile within steel, and will migrate to locations of high stress, such as at crack tips.

Although modern engineering steels are generally ductile, the hydrogen atoms embrittle the steel crystal structure, making it locally brittle and so it cracks a small amount, allowing the crack tip to move forward, in an incrementally repeating way as the cracking propagates.

For carbon steels there are three main types of

stress cracking is mainly a concern in the petrochemical industry and the extraction of ‘sour’ oil and gas, there are means by which hydrogen sulphide can occur in other environments and attack steels.

Stress corrosion cracking in carbon steels can occur when they are exposed to high pH (i.e. alkaline) conditions from chemicals such as carbonate or bicarbonate environments. The cracking propagates along the steel’s grain boundaries (called ‘inter-granular’ cracking).

Even under near-neutral wet conditions, steels can suffer from a different kind of SCC where the cracking propagates through the steel without being affected by the microstructure’s grain boundaries (‘trans-granular cracking’).

CORROSION CONCLUSIONS

There are many ways that the environment can corrode and damage steels, and a forensic materials engineer will look for clues from the appearance of the corrosion products and the corroded surface, and details of the exposure conditions, to help identify when the damage could be something more significant, because corrosion is not just rust

Large coils of steel are used in the manufacture of panels for cars and white goods appliances.

New horizons demand careful risk assessment

James Vavasour , Business Stream Director, MWS at Global Maritime discusses the impact of the Northwest Passage as a potential major trade route and asks whether innovation and globalization are outpacing insurance and regulation

The Northwest Passage, a fabled water route through the Canadian Arctic Archipelago connecting the Atlantic and Pacific oceans, has captured the imagination of explorers for centuries.

Dubbed the “Arctic Grail,” its discovery promised a shorter and more lucrative trade route to East Asia. However, it remained elusive due to treacherously icy conditions that made navigation fraught, if not often impossible.

Now, with the effects of climate change becoming increasingly evident, the Northwest Passage finds itself in an unprecedented condition, presenting both significant opportunities and emerging risks as a potential major global trade route.

BRIEF HISTORY

The history of the Northwest Passage is deeply intertwined

with the Inuit and other indigenous peoples, who were the first explorers of the Arctic region. While much of their travels remain undocumented, they are considered the true discoverers of the Northwest Passage.

In the 16th century, European explorers set their sights on finding a more direct shipping route to Asia through the northern waters. However, many of these attempts ended in failure and tragedy.

One of the most infamous expeditions was that of HMS Erebus and HMS Terror, led by Sir John Franklin in 1845. These British Royal Navy ships embarked on a journey to find the Northwest Passage, carrying a crew of 134 men and three years’ worth of supplies, including luxuries such as a piano, fine crystal, and a vast library.

They never returned and their disappearance sparked what became one of the most expensive search-and-rescue

missions in history. It wasn’t until 1859 that searchers found artifacts and evidence of their fate on King William Island, suggesting that the ships had become trapped in the ice, leading to tragic consequences, including possible cannibalism among the crew.

Although necessitated by tragedy, these search parties greatly expanded our understanding of the region and extensively mapped out much of the Northwest Passage – more on that later.

CHANGING CLIMATE

Fast forward to the present day, and the landscape of the Canadian Arctic has undergone a dramatic transformation caused by climate change.

Rising global temperatures have led to prolonged ice-free periods from July to September, resulting in the retreat of Arctic ice. As a consequence, the Northwest Passage is now on the cusp of becoming a commercially viable shipping route.

This phenomenon has attracted the attention of major global players, including China, Russia and the US, as the Arctic offers untapped natural resources and new shipping lanes that could reshape global trade flows while enhancing Canada’s global standing.

REGULATORY CHALLENGES

Despite the potential benefits, navigating the Canadian Northwest Passage presents a complex regulatory landscape. Various entities, such as Transport Canada, the Canadian Coast Guard, the Shipping Federation of Canada, classification societies, marine warranty surveyors, and specialized ice navigators, can all play a part in Arctic shipping. But these roles are not particularly well defined and often difficult for new entrants to navigate.

This is perfectly exhibited in a laundry list of acronyms, some too perfect to believe they were happenstance! Adding to the complexity, this myriad of initialism includes the Arctic Waters Pollution Prevention Act (AWPPA), the Arctic Shipping Safety and Pollution Prevention Regulations (ASSPPR), and the Arctic Ice Regime Shipping System (AIRSS), the Northern Canada Vessel Traffic Service Zone Regulations (NORDREG), and the pitch-perfect Polar Operational Limit Assessment Risk Indexing System (POLARIS).

These all potentially play essential roles in managing and assessing the risks of transiting the Northwest Passage. And lines often feel blurred between regulatory mandates and “best practices,” with a steep learning curve for those hoping to capitalize on this potential opportunity.

OPPORTUNITIES

The potential of the Northwest Passage as a major trade route offers numerous advantages for vessel operators. Shorter trade routes of up to 2,500 nautical miles and faster transit times of about a week translate to substantial cost savings.

Bypassing canal fees and delays, such as those imposed by the Panama and Suez Canals, provides a considerable competitive advantage for shipping companies.

Moreover, this shorter route could significantly reduce carbon emissions, aligning with global efforts to address climate change. Offshore wind power is a key component of the transition to renewable energy sources and reducing carbon emissions.

The availability of more efficient shipping routes through the Northwest Passage could accelerate the deployment of offshore wind farms on the East Coast, aiding in the overall transition to sustainable energy systems. As one might imagine, the potential benefits for the development of offshore wind farms, among other large-scale construction projects, could be considerable.

From a geopolitical standpoint, the Northwest Passage holds strategic importance. For countries looking to avoid the Northeast Passage, this alternative offers a viable option. Canada, as the custodian of the Northwest Passage, could enhance its standing with other world powers by facilitating free trade and benefiting from increased economic activity within its territory and territorial waters.

ICE BREAKING SUPPORT

While the allure of potential efficiencies is strong, there are risks, not least icebreaking.

The Canadian Coast Guard (CCG) operates eight to nine icebreakers in the Canadian Arctic, but their primary priorities are search and rescue operations and Arctic indigenous territorial re-supply. This means that icebreaker support for commercial shipping is not guaranteed, immediate, or readily available.

As the icebreakers generally leave the region on October 15, any hope of assistance beyond that date is infinitesimal, leaving vessels susceptible to being beset by ice. Such circumstances could result in hull or mechanical damage. For insurers, any number of unfavorable outcomes may occur, whether against a marine hull, construction all-risk (CAR), and/or delay in start-up (DSU) policies, depending on the cargo.

CHARTING AND GROUNDING

The lack of up-to-date and reliable charts is a significant concern for Arctic shipping. Antiquated charts coupled with unreliable digital alternatives pose a real danger to navigation accuracy.

Despite the preference for Canadian paper charts, the reality of multiple data sources and inexperienced operators heightens the risk of errors and accidents. Additionally, substantial draft restrictions, and strong tidal currents in key locations such as Magpie Island present significant risks to vessel safety and timely transit.

OIL SPILLS ARE ANOTHER MAJOR RISK.

The Arctic Council has identified oil spills as a major threat and colder temperatures in the region exacerbate cleanup efforts. Ineffective oil spill cleanup technology and limited resources challenge response capabilities, while insufficient ports and infrastructure hinder efficient containment and mitigation. The potential for environmental catastrophe looms large as shipping activity increases in the Northwest Passage.

“Rising global temperatures have led to prolonged ice-free periods from July to September, resulting in the retreat of Arctic ice. As a consequence, the Northwest Passage is now on the cusp of becoming a commercially viable shipping route.”

INDIGENOUS COMMUNITIES

The disruption of the natural habitat and traditional activities of Arctic indigenous communities must be minimized through proactive engagement and responsible practices, remembering the ice is their land.

Impacts on indigenous communities and traditional activities must be considered. Food security may be impacted by marine traffic, and indigenous communities have cultural activities that are performed on the ice.

Engagement with Arctic indigenous communities should also factor into the development of any Arctic Operations Plans produced in advance of transiting the Canadian Arctic Archipelago.

A FLUID PLAN

Arctic operations are inherently unpredictable, demanding a flexible and fluid approach. The Arctic Operations Manual, when developed for individual transits, should recognize the need for real-time adaptations to changing ice conditions and navigation challenges.

Decision-making often rests heavily on a single, highly qualified individual. However, decisions may not always encompass considerations beyond Marine Hull Policies. Limited, or more likely, no consideration for cargo or DSU policies hampers a more comprehensive risk assessment.

Moreover, the likelihood of full marine warranty surveyor attendance for transportation under current market conditions is unlikely, rendering desktop reviews which are nearly entirely ineffective in addressing the complex ever-changing risks of Arctic navigation.

OBJECTIVE INSIGHTS

As new trade routes like the Northwest Passage emerge, insurers must confront a range of risks and uncertainties. Thirdparty review and evaluation become essential tools in navigating the complexities of Arctic shipping, assessing risks accurately and

developing appropriate insurance solutions.

The objective insights provided by independent experts can enhance insurers’ understanding of the unique challenges posed by Arctic navigation, enabling them to offer comprehensive coverage and support sustainable and responsible growth in this new era of global trade.

The Northwest Passage, once an elusive Arctic Grail, now stands at the threshold of becoming a major global trade route due to climate change. As melting ice leads to prolonged icefree periods, countries and operators vie for opportunities to reshape global trade flows and gain competitive advantages. These opportunities are accompanied by emerging risks and complex regulatory challenges that must be navigated with prudence. Environmental protection, social responsibility and sustainable practices must be at the forefront of any Arctic shipping endeavour to ensure the preservation of this delicate ecosystem and the well-being of its inhabitants. As the ice continues to recede, the Northwest Passage demands responsible stewardship and cooperation on a global scale.

Given the unique and evolving risks associated with Arctic shipping in the Northwest Passage, the insurance market must also recognize the imperative of thorough third-party review.

Independent experts can offer unbiased assessments, specialized knowledge and experience in navigating the challenges posed by Arctic operations. A comprehensive third-party review helps insurers develop accurate risk models, understand environmental and social implications, as well as make informed decisions regarding recommendations, compliance, while minimizing claims and possible coverage issues when problems occur – and they will.

As this new era of Arctic shipping unfolds, the collaboration between insurers and third-party experts becomes paramount in ensuring sustainable and responsible growth in this emerging global trade route.

Rising to the battery fire risk

A fire involving a Lithium-Ion battery can be particularly fierce, producing large amounts of heat whilst emitting substantial amounts of flammable and toxic gas explains the British Marine Loss Prevention Team

The use of Lithium-Ion (Li-Ion) batteries as power sources continues to grow in the large yacht sector because of their flexibility and convenience.

However, there are additional emerging risks associated with Li-Ion batteries in a marine setting. Vessel owners, operators and crews must follow precautions and take actions to minimise the possibility of catastrophic fire.

Because of the potential dangers, a flag state or classification society of individual yachts may have specific rules around the usage of Li-Ion power sources onboard.

The UK Maritime and Coastguard Agency has also recently published MGN 681, which provides some excellent guidance on the current best practice for safe stowage and operation of electric-powered craft and other vehicles on yachts. Particular attention should be paid to battery management, battery charging, crew training and firefighting.

BATTERY MANAGEMENT

The efficient management of Li-Ion batteries is of utmost importance. We recommend that a nominated lead (the chief electrician/engineer) is designated as responsible on board and that this information is recorded in the vessel safety management system or procedures.

We strongly recommend that a handheld infra-red hotspot scanner is made available and a supplementary precaution could be the use of mobile phones with infra-red (IR) camera capabilities. Temperature monitoring can also provide advance notice of a problem. Some estimates suggest 60⁰C-70⁰C can

Thermal

runaway is when a Li-Ion battery cell enters a self-heating state (exothermic reaction) and the heat generated is greater than the heat dissipated. This uncontrolled, irreversible self-heating will continue producing more heat and more gas until a violent failure occurs.

initiate thermal runaway.

Storage locations should be well-ventilated spaces that include fire detection and fire protection arrangements and need to be maintained at a reasonable range of temperatures. The space should be clear of combustible material and must never have dangerous goods located inside. Purpose built, fireproof storage cabinets are available for this task and are a good solution where space allows.

Li-Ion batteries carried onboard should be kept to a minimum, particularly e-bikes, e-scooters, or any other shoreside purchased equipment. Exposure to water, particularly sea water, is a substantial risk factor for Li-Ion batteries and this introduces an unnecessary risk onboard.

Damaged batteries should be quarantined and offloaded in accordance with local regulations as soon as practical.

THERMAL RUNAWAY

Charging is one of the riskier operations for thermal runaway. Damage to batteries during charging has been proven to be a cause of thermal runaway, and maximum caution should be exercised. All personnel involved should monitor charging with the same attention that any refuelling would be.

A fuel hose should never be left unattended while refuelling a jet ski, and a similar mindset must be applied to charging.

Consideration should also be given to the optimum location for charging. Batteries must always be secured against movement but should have sufficient air flow to allow for the optimum temperature range to be maintained. Charging in direct sunlight or in locations with a high ambient temperature is not recommended.

Charging on an external deck should only be conducted within a fireproof container or on a fireproof mat. Internal charging must be within a fire-rated compartment with sufficient fire detection and suppression capabilities.

Purpose-built fireproof storage cabinets are available with charging capability and fire/gas detection monitors installed.

Always think about fire:

• Does the charging location block any escape routes?;

• Can the electricity supply to the charger be isolated remotely?;

• Can ventilation to the space be controlled remotely?; and,

• Is the space clear of extraneous combustible material?

APPROPRIATE TRAINING

Training should be provided for all staff onboard regarding the potential dangers of Li-Ion batteries, appropriate to their level of exposure. Personal Protective Equipment (PPE) appropriate to handling a suspect battery should be provided and the location of a quarantine area needs to be

clearly identified.

Crew members should be encouraged to report any suspected damage to batteries. Typical signs that a battery has been damaged are (Biffa, 2024):

1. Bulging: If your battery appears bloated, it is a clear indication of internal damage. This is usually caused by the buildup of gas or electrolyte inside the battery.

2. Leaking electrolyte: A damaged battery may leak electrolyte, which is a fluid or gel-like substance.

3. Unusual smells: Strong or unusual smells can indicate internal damage. Any acidic or chemical-like odours should be taken seriously.

4. Overheating: These batteries should not become excessively hot during normal operation.

5. Device malfunctions: If a device powered by the battery starts to behave erratically, it could be a sign the battery is damaged.

The most notable indication of a problem with a battery during charging is a steady increase in temperature. Other indicators include hissing, whistling, or popping noises, and evidence of ‘chemical’ smells. Most seriously, any vapour issuing from the battery is an indication of

critically advanced thermal runaway and immediate action needs to be taken.

FIREFIGHTING

Firefighting training should be provided with the scenario of a Li-Ion battery fire, including the use of specific fire extinguishing methods, both fixed and portable.

If a fire occurs in port, contact the emergency services immediately for the specialist firefighting skills required.

The use of fire suppression blankets or specialised Li-Ion battery portable fire extinguishers may be sufficient to contain or extinguish a fire in early stages. However, thermal runaway will not have stopped, and the battery will still be capable of producing extreme heat and dangerous gases, or reigniting, even if appeared extinguished.

Li-Ion fires rapidly produce extreme heat and toxic gas/ vapours, so access to any space with a battery fire will be impossible, unless in full firefighting PPE with self-contained breathing apparatus.

The most effective means of tackling these fires is to suppress flames around the device as they repeatedly flare up while allowing the battery to burn itself out. The extreme

“Charging is one of the riskier operations for thermal runaway. Damage to batteries during charging has been proven to be a cause of thermal runaway, and maximum caution should be exercised. All personnel involved should monitor charging with the same attention that any refuelling would be.”

heat produced by a battery fire means that boundary cooling remains necessary, and consideration should be given to how this will be delivered in the event of a fire.

The suppression of flames around the device may not be feasible in a confined space on a yacht. In which case remotely activated water drenching is the most realistic firefighting medium to extinguish the fire or keep controlled. It should be noted that introducing large amounts of water changes the fire hazard into an explosion hazard.

It is vital that electrical isolation of any charging equipment connected to the batteries is carried out as soon as possible if a fire is suspected or confirmed. Additionally, remote control of ventilation may be required to vent toxic vapours, overriding the conventional advice to close all ventilation to a compartment with a fire.

It must be understood that re-ignition of a battery remains a possibility for weeks or even months after its apparent suppression. A fire damaged Li-Ion battery must be continuously monitored by personnel with firefighting equipment ready for immediate use until it can be safely disposed to a shore reception facility.

Underestimated and increasingly risky

Thomas

Myers, J.D.,

Claims Executive at SCB, Managers of The American P&I Club, warns against underestimating the cargo risks associated with scrap metal

Scrap metal cargoes can often pose underestimated risks to carriers and their marine insurers. The irregular and impure nature of scrap metal cargo gives rise to several significant risks.

Those risks, when combined with the increased value of scrap metal cargoes, have led to increases in the number and value of claims.

Therefore, vessel owners and marine insurers should take care to exercise increased vigilance and take extra precautions when carrying scrap cargoes.

While scrap metal can be divided into two categories, ferrous and non-ferrous, the International Maritime Solid Bulk Cargoes Code (IMSBC Code) describes “scrap metal” as: “‘scrap’ iron or steel; covering a wide range of ferrous metals, primarily intended for recycling.” The IMSBC Code notes that scrap metal poses no special hazards and “is non-combustible or has a low fire-risk.”

However, where a scrap metal cargo consists of exclusively smaller pieces, it is categorised as “ferrous metal borings, shavings, turnings or cuttings,” which are liable to selfheating and require significantly higher care in handling.

It is not unusual for bulk scrap metal cargoes to include turnings and cuttings. The IMSBC Code highlights that there are no special hazards posed by scrap metal, “except when cargo contains swarf (fine metal turnings liable to spontaneous combustion).”

IRREGULARITIES AND IMPURITIES

Certain risks originate from the cargo itself, as highlighted in the IMSBC Code, while many more are from the irregularity and

impurities of the metal scrap in bulk.

• Risk of fire: Fire is a constant risk with scrap metal cargoes. The source of this risk is either inherent to scrap metal or arises from non-metal materials included in the cargo. Some scrap metal is liable to self-heat and ignite spontaneously, particularly when in a finely divided form, such as metal borings, shavings turnings or cuttings and wet or contaminated with combustible matter. Should the cargo be wet, oxidation (rust) can occur and may generate enough heat to start a fire, especially where the scrap metal contains swarf. The IMSBC Code stipulates that the cargo should be kept as dry as practicable and not be handled in precipitation. Alternatively, the risk of fire is a result of the recycled nature of the cargo and the likelihood of non-metal impurities contained in bulk scrap metal, including, but not limited to lithium batteries, oily rags and filters, styrofoam, coatings, plastics and tires.

• Risks in loading, carriage and discharge: Scrap metal may, depending on its source and nature, be comprised of irregularly sized and shaped pieces, which require special care. While being loaded and discharged, the vessel, crew and longshoremen maybe exposed to significant risk of damage or injury if the scrap metal cargo is being carelessly loaded. Indeed, cargo holds and ladders are commonly subject to damage caused by heavy and sharp pieces of scrap metal cargo. Annex 9 of the Code of Safe Practice for Cargo Stowage and Securing, Safe Stowage and Securing of Metal Scrap in Bulk highlights the risks associated with scrap metal cargoes and provides guidance with respect to its safe stowage.

• Risk of radioactivity or toxicity: Scrap metal cargoes may contain radioactive materials which have not been properly disposed of and entered into the recycling stream. Additionally, impurities in the cargo may result in the release of toxic or harmful fumes that can cause acute and chronic effects on the health of the crew and others.

CMT Y Not 6

While there has been no shortage of incidents involving scrap metal cargoes, the US National Transportation Safety Board (NTSB) recently issued a report regarding the fire aboard Scrap Metal Barge CMT Y Not 6, that occurred on May 23, 2022.

The CMT Y Not 6, a 300-foot scrap metal barge was undertow transiting Delaware Bay when a fire was discovered. According to the NTSB report, the barge was loaded with more than 7,050 tons of a type of scrap metal referred to as “shredder feed.’’ The fire burned for 26 hours before being extinguished. While no environmental impact or injuries were reported, the fire caused estimated damages of $7m to the CMT Y Not 6.

Prior to the sighting of smoke and glow emanating from the scrap metal cargo aboard the barge, the crew aboard the towing vessel did not report anything unusual with the tow or cargo.

When the fire broke out, the towing vessel reported the incident to the appropriate authorities and took steps to

secure the barge. The Coast Guard and fire boats from the local municipality were on-scene within an hour, but the fire had already developed into an “inferno.”

Significantly, the investigation of the casualty failed to identify the cause of the fire. The NTSB report notes that the molten scrap metal solidified into large pieces and “[s]everal flammable nonmetallic materials, including plastics, rubber tires, and electrical components, were visible.”

Further, “investigators found no conclusive evidence within the debris pointing to the source of the fire. Investigators did not identify any metal cuttings or borings within the undamaged scrap.”

The NTSB report concluded that the cause of ignition was “an undetermined source, such as sparking from shifting metallic cargo, self-heating of metallic or nonmetallic cargo, improperly prepared vehicles and appliances, or damaged lithium-ion batteries.”

LIMITED CONTROL

While marine insurance providers have limited ability to control the risks inherent in scrap metal cargoes, certain efforts can be taken to mitigate the risks of the losses and claims.

• Educated carriers and crews: Insurers can support their insureds with efforts to educate their employees and crews on the risks inherent in scrap metal cargoes. This can include:

> Identification of the cargo and any hazardous materials contained within the cargo;

> Monitoring of the scrap metal cargo for impurities while it is being loaded; and,

> Continuous checking of the temperature of the cargo in transit.

• Contractual protections: Owners and charterers of vessels carrying scrap metal cargoes should ensure that the charterparty adequately accounts for the nature of the cargo. This can be achieved by including the “BIMCO Scrap Metal Clause 1998”, which states that the cargo must be loaded in accordance with Annex 9 of the IMO Code of Safe Practice for Cargo Stowage and Securing, with the costs of any damage caused to the vessel shall be for the charterers’ account if they fail to comply with those terms. Additionally, shippers of scrap metal should warrant that their cargo is free of swarf and other hazardous materials.

“Certain risks originate from the cargo itself, as highlighted in the IMSBC Code, while many more are from the irregularity and impurities of the metal scrap in bulk.”

Unwavering commitment to the sea

Captain Deha Aydin , Marine Consultant at Esenyel Partners Lawyers & Consultants, argues that Turkish authorities need to take a serious look at its maritime pollution regime

The recognized escalation in fines imposed on vessels contributing to marine pollution in the year 2024, marked by a significant surge of 58.46%, necessitates a comprehensive examination.

This adjustment, deemed appropriate in light of the Turkish nation’s challenges with elevated inflation rates, underscores the imperative to strengthen deterrence measures for the protection of our seas.

Strategically positioned along the north, south and west by seas, our nation aspires to take a leading role in the protection and preservation of our seas, especially our enclosed Black Sea and Marmara Sea.

Beyond the immediate aim of protection, the overarching objective is to amplify the existing ecosystem, ensure prolific fishing through meticulous fisheries monitoring and bequeath a more habitable environment to our future generations.

In response to incidents of marine pollution, the “Turkey Environment Agency,” established under the Ministry of Environment and Urbanization in late 2020, promptly took action. Contrastingly, in 2020 and earlier, the task was carried out by the Department of Environmental Control of the Municipalities.

POLLUTION FINES

Before 2020, maritime pollution fines were based on thorough sample analyses from the pollutant, affected, and clean areas. Post-2020, regulatory changes shifted the focus to visual evidence alone (photos, videos, drone images), eliminating the

need for sample analysis in determining fines for polluting vessels.

This shift prompts contemplation regarding the legitimacy of the assertion of genuine sea pollution. It also raises questions about the identity of the pollutant, as the current approach seems to prioritize fines ahead of a thorough understanding of the content of the pollutant.

In response to such considerations, we strongly recommend that clients confronted with these situations proactively collect samples themselves.

One perplexing aspect is the sustained use of a penalty calculation method based on the size of the polluting ship. Instead of determining the actual harm inflicted on the sea in cubic meters, fines are imposed based on the vessel’s gross tonnage. This approach raises questions about the fairness and equity of the established system.

Consider this straightforward example: The act of depositing 20 liters of waste (oil product) into the Sea incurs a fine of 17,661 TL, which will be doubled to the total fine amount of 35,332 TL in the Marmara Sea due to its designation as a specially protected area.

In contrast, the identical act perpetrated by a 50,000 gross ton tanker attracts a substantially higher fine of 19,902,560 TL. The

“Why is the severity of the penalty tethered to the ship’s tonnage rather than the actual harm inflicted on the sea?’’

SPECIAL MEASURES

The IMO (International Maritime Organization) identifies specially protected areas that necessitate special protective measures because of the potential for significant ecological, socioeconomic, or scientific repercussions in the event of harm.

It becomes apparent that the quantity of waste (whether 20 liters or 100 liters) has minimal impact on the fines imposed. The primary determinant of fines is the gross tonnage of the polluting ship.

This raises the question: Why is the severity of the penalty tethered to the ship’s tonnage rather than the actual harm inflicted on the sea?

Moreover, recent regulations introduce a multiplier of 10 for “dangerous” pollutants. What does dangerous mean? For whom

is it dangerous? The lack of clarity in defining “dangerous” necessitates a stringent and comprehensive categorization based on international codes such as IMDG, IMSBS or MARPOL.

In light of these pertinent concerns, we advocate for an urgent assembly of Turkish maritime authorities and in an international manner, including the Chamber of Commerce of the Sea, KOSDER, and GISBIR.

EU REFORM

The aim of this gathering is to conduct a thorough review and reform of existing regulations, with collaborative support from relevant institutions and organizations. Such efforts are imperative to establish a fair, effective, and equitable framework for the mitigation of marine pollution.

In the meantime, the European Parliament and Council have jointly approved new rules to prevent ship-induced marine pollution and established sanctions for related offences.

The directive mandates member states to impose “appropriate” fines designed to serve as effective deterrents. The directive focuses on strengthening information sharing through CleanSeaNet among EU members for better pollution tracking. It requires a 25% on-site verification of alerts, with disclosed follow-up actions.

The European Parliament aims to inspect half of all alerts, stressing the importance of collective efforts and advanced technologies to combat illegal waste disposal.

On the other hand, whereas the primary responsibility for the prevention of pollution and the rehabilitation of areas affected by marine pollution lies with the Ministry of Environment, Urbanisation and Climate Change in Turkey, the Undersecretariat of Maritime Affairs and the Coast Guard Command also significantly contribute to this endeavor. In other words, the Ministry establishes rehabilitation centres tasked with conducting monitoring studies aimed at assessing the long-term impacts of pollution on various facets such as human health, biodiversity, natural and historical heritage.

In conclusion, surrounded by seas on three sides, our country has significant potential for further advancements in maritime endeavors. A profound legacy from the sea enthusiast and visionary leader Mustafa Kemal Atatürk urges us to adopt maritime as a great national ideal and to accomplish it swiftly.

As he emphasized, “Denizciliği Türk’ün büyük milli ülküsü olarak benimsemeli ve az zamanda başarmalıyız” (We must embrace maritime as the great national ideal of the Turks and achieve it in a short time). Let us consistently recall these words, work diligently towards our maritime goals and fulfill our responsibilities with unwavering commitment.

glaring discrepancy in fines for the same pollutant in the same sea raises concerns.

By Bhaskar Nigam, Head of Loss Prevention – Singapore, The Shipowners’ Club

The Shipowners’ Club1 is the market leader in providing Protection and Indemnity (P&I) cover, legal costs cover and associated insurance solutions and services for smaller and specialist vessels, insuring some 34,000 vessels across the globe.

My role as head of loss prevention – Singapore, entails developing and implementing the Club’s strategy for the loss prevention department.

This is achieved by offering high quality services and initiatives whilst also proactively engaging and collaborating with all relevant stakeholders in line with the Club’s overall vision of ‘Ensuring Peace of Mind’.

Approximately 1,100 of our members are based in South-East and Far-East Asia, with 51% of all entered gross tonnage (GT) trading in the region. Furthermore, 54% (266 of 491) of all condition surveys that the loss prevention department undertook globally in 2023 were carried out in South-East and Far-East Asia.

My role therefore puts me in a vantage position to view the current and developing trends in the region from a loss prevention aspect, especially for the niche tonnage that the Club insures.

Most of our initiatives (be it seminars, training sessions, participating in industry wide conferences, issuing pertinent loss prevention advisories or undertaking the condition survey programme [CSP]) are driven from a deep understanding of current and emerging risks, whether they’re at a local, regional or an individual member level.

The statistics that are derived from analysing our claims or condition survey data form the foundation of the Club’s overall risk mitigation framework.

BESPOKE AND TAILORED

When it comes to industry wide seminars or collaborating with other industry bodies and peers, the Club tries to be a voice for our members. However, when interacting with our members, either via visits or by hosting seminars and training sessions, the intention is to make every interaction bespoke and tailored to their individual needs.

What sets the region apart is that members and brokers herein have always preferred regular interactions and face to face meetings which offer that ‘personal touch’ aspect.

While the Covid-19 pandemic has made the region more accommodating to online meetings and training sessions, to ensure we create maximum value for our membership, but these virtual meetings are complemented by in person meetings

A loss prevention perspective from South-East Asia

and seminars, which are appreciated by our stakeholders.

When it comes to areas that are in focus in the region (most of these would apply globally too), the Club notes safe navigation, extreme weather phenomena, crew training, emergency response/preparedness, safety culture, regional piracy, and regulatory compliance as areas that continue to require attention.

The loss prevention department’s focus is primarily set on safety at sea. Therefore, this year we are proud to align ourselves with “IMO’s World Maritime Theme for 2024 –Navigating the future: safety first!”.

This year also marks 50 years since the adoption of the 1974 SOLAS Convention (the key IMO treaty regulating

maritime safety).

The loss prevention team has hence embarked on a year-long campaign to assist in enhancing maritime safety, security, and protection of the marine environment against the backdrop of a continuously evolving and innovating environment.

From crew health and wellbeing to adverse weather conditions, towage operations, and piracy at sea, the aim is to cover a wide array of topics within this campaign, all with a core focus on safety.

DYNAMIC GROWTH

While keeping up to date with the current operating

landscape, it is also important to keep an eye on what the future holds for the region.

South-East Asia is predicted by various economic sources to remain as one of the most dynamic areas of the world, with major regional economies anticipated to grow at a pace much faster than the rest of the world.

An expected and significant economic growth would contribute to an expansion and a rise in consumerism. The interdependence between a region’s economic growth and its shipping activity is well established, therefore an increase in shipping activity focussed and centred around the South-East Asian markets is also predicted.

GT in South-East and Far-East Asia entered with the Club has grown from about 13.6 million GT in 2019 to 15 million GT in 2022, with the possibility that this number will continue to rise.

With potential business growth in the region, it is important that the Club continues to monitor and address not only the existing trends and issues but also establish what these might be in the future as trade and business expands.

The future brings with it an exciting array of opportunities and areas of development.

Like the rest of the world, decarbonisation and alternate marine fuels remain buzz words and all authorities, be it Singapore, Malaysia, Indonesia, Vietnam, Thailand etc, are working towards their respective goals with their own blueprints outlined.

PRIORITY LISTS

In addition to this, aspects pertaining to the adoption of advanced technology, autonomous shipping, data collections and analysis, and cyber security have started to rank high in numerous priority lists.

Each of the above would bring with them regulatory evolution and subsequent requirements for re-training and upskilling of not only the onboard crew, but also many of the stakeholders based ashore who are involved in the management of the shipping industry.

The loss prevention service is considered one of the core services of the Club. Forecasting for the future, the team is continuously looking at ways to be adaptive and forward-thinking, with a proactive and predictive outlook. Collaboration remains a crucial component.

The club values its role as a key stakeholder in various discussions with some of the regional authorities in its endeavour to meet their decarbonisation goals. With this in mind, our loss prevention strategy seeks to incorporate environmental and sustainability aspects to ensure it complements the Club’s corporate responsibility strategy.

As a parting note, the dynamism and ever evolving nature of the region presents a unique blend of exciting challenges and opportunities that the Club and the loss prevention department will continue to embrace to ensure that we continue to make a meaningful contribution.