The Marine Insurer Issue 18 - June 2024

The Marine Insurer

Marinesector: steppinguptothe netzerochallenge

l Climate change: Water levels changing– up and down

l Greek insurance code: Welcome step forward for marine sector

l Solar energy: Tough times ahead?

l Supply chain: Technology set to help

l Fuel spec: Importance of getting it right

Dali incident

Exploring the he impact of the Dali incident on the global supply chain

06 Energy transition

Will the marine and energy insurance sector rises to the net zero challenge 08 Solar energy

The sun is shining on solar power in the US. But there are clouds on the horizon

Cargo and renewable energy Focusing on the risks generated by the transition to new forms of power

12 Insuring energy

Managing risk and building resilience on during switch to Energy transition

14 Emissions trading

The shipping industry is facing up to new emissions trading rules

18 Greek maritime code

The new Greek code of private maritime law under the spotlight

20 Maritime law

The Greek code of maritime law: A new chapter

22 US sanctions

We look at how ow the ever-evolving US sanctions regime works, and why operators need to keep abreast of new developments

The International Chamber of Shipping and several states have called on the IMO to solve legal inconsistencies.

Examining the ever more critical role played by data across the maritime and logistics industry

The implications of the recent US Appeals Court narrowing of the definition of Jones Act seamen

Digital transformation

Overcoming psychological barriers to digital adoption in the marine market

Challenges from all directions

The Dali accident in the Port of Baltimore could become the largest marine claim in history…to date. We will have to wait and see until September, by which time most claims should have been notified, to discover the full extent of the numbers.

Given the accident happened in the US, market experts are all expecting high numbers. While it is expected to be a manageable event for the market, the bad news is that thousands more bridges in the US remain in a vulnerable state and accidents involving shipping are not uncommon.

So, not only could there be a yet bigger claim from a similar event, but the market has to gear itself up for enormous claims coming from myriad directions.

The Red Sea is far from calm with the Houthis continuing their attacks on shipping and with the Somali pirates also showing their hand once more. At the same time, we have the ongoing conflicts between Russia and Ukraine, as well as Israel and Hamas. Only time will tell what the outcome of either conflict will be. And at the same time we have the Chinese continuing to sable rattle around Taiwan and many more conflicts ongoing around the world.

Political turmoil continues as half the world heads to the polls with unpredictable results and potentially far-reaching consequences for global trade.

And then, of course, there remains climate change and potentially the biggest risk of them all. We are beginning to see impacts, such as the Panama Canal drying up, but most scientists warn the worst is yet to come – perhaps echoed in the news that the Caribbean and US eastern seaboard are facing the worst ever predicted hurricane season in the months to come.

worldwide effects of freshwater levels in rivers and canals on the cargo sector

However, as humans we are immensely resourceful and solutions are being developed and delivered on an almost daily basis.

The marine market is no different and technology is playing an enormous role in helping to reduce the industry’s carbon footprint but also in navigating in changing seas.

The marine insurance market is used to the ups and downs of life and is resilient enough to manage all the challenges posed. I am sure it will continue to cope with the changes ahead, many of which we explore in this issue.

Enjoy the read!

Liz Booth Editor, The Marine Insurer

Dali incident: Wake-up call for the market

Andrew Yeoman , CEO of Concirrus, explores the impact of the Dali incident on the global supply chain and how a data-driven approach to risk management is crucial for building a more resilient future for marine insurance

The marine cargo insurance market is a central cog in the global supply chain machine, enabling the smooth movement of goods worldwide.

In the last year, premiums for thesector reached a colossal $20.5bn - an 8.3 per cent increase from the previous year. Yet, despite all the risk transfer the industry remains vulnerable to sudden and unforeseen disruptions.

The most recent incident occured in the Port of Baltimore in March this year, leaving insurers rushing to understand their financial exposure. With GA now declared, we begin a process that could take months (if not years) to calculate losses. In the meantime insureds must examine how this disruption affects their business. However, this incident once again underscored a clear vulnerability in the insurance market and provided an unwelcome lesson on how cargo aggregation needs to be managed.

The Dali, a container vessel with a deep-rooted trade history between Asia and North America, lay immobilised, bringing the loading and unloading of over 9,700 TEUs to a grinding halt and leading to widespread congestion at the port.

The incident left many vessels stranded in the bay and created a ripple effect that impacted the many industry sectors that were dependent on timely logistics.

DALI EFFECT

The Port of Baltimore is a renowned hub for vehicle imports, ensuring a steady flow of cars and light trucks to dealers in the Northeast and Mid-Atlantic regions of the US.

With more than 100,000 cars reported to have passed through the port in the last year, the port’s closure meant the

automotive sector faced immediate logistical challenges. This led to significant delays that have undoubtedly impacted production lines and market supply.

The Port of Baltimore is also a key departure point for waste-paper shipments bound for recycling in China. The immobilisation of these shipments did more than just pause operations - it disrupted the continuous movement of materials essential to global consumption and the sustainability efforts of reusing such raw materials.

The knock-on effects also stress-tested the adaptability of the ports to the north and south of Baltimore. These traditionally less busy ports had to accommodate rerouted vessels and prepare to accommodate sudden, unexpected cargo loads.

LESSONS LEARNED

The Dali incident exposed many vulnerabilities in the marine cargo insurance market and provided valuable lessons for the insurance industry.

Traditional risk assessment models are now clearly obsolete - what was unknowable previously can now be known. The industry must choose to evolve and embrace models powered by real-time because as unfortunate as this incident was, the losses and complexities that would have come with an ultra large container vessel (ULCV) which was in-bound to the US boggle the mind.

A comprehensive and continuous risk assessment is essential.

The traditional models that rely on historical data and static variables can no longer keep up with the increasing demands of the modern supply chain.

Insurers must protect their exposure with data-driven analytics that prevent unavoidable financial and reputational loss following an unforeseen event.

Predictive modelling and enhanced data analytics are here to help insurers anticipate these disruptions and deliver accurate risk assessments at the click of a button.

Strategic contingency planning is just as important.

The Dali was the latest incident to highlight the importance of forward-thinking at every level of the supply chain.

Insurers can now leverage data-driven insights to confidently advise their clients on the risk management strategies that will alleviate potential disruptions and provide clear shipment rerouting guidelines. Indeed, the forward-thinking brokers are now embracing this new data to build advisory services for their clients.

One thing is clear, real-time data and predictive analytics are no longer just an option - they are the future, and they are essential.

RISK MITIGATION

Optimal decision-making is vital for efficient risk management, real-time data and predictive analytics provide the safety net for insurers to measure, anticipate and mitigate risks proactively.

The paradigm has shifted from periodic to continuous risk

management based on new data and AI capabilities to provide. access to thousands of valuable data resources.

An encouraging period of data transparency is developing in the industry, driven by strategic partnerships that provide access to thousands of valuable data resources.

It is this transparency that will fuel risk modelling and help insurers offer more competitive and accurate pricing for clients, benefitting both sides of every transaction.

Improved visibility into the dense supply chain structure will lead to better loss prevention strategies and overall efficiency across the sector.

Such real-time analytics will enable insurers to proactively mitigate risk, potentially reducing exposure during events such as the Dali incident.

Understanding cargo movements across global ports will help insurers offer risk mitigation strategies tailored to marine conditions that can change by the second.

The use of predictive analytics can help insurers identify potential risks before they escalate into significant disruptions. For example, the early detection of weather patterns or geopolitical tensions informs clients of alternative routes or strategies to avoid high-risk areas.

A proactive data-driven approach to risk management is setting a new standard for the industry, improving resilience, and reducing the impact of unforeseen disruptions.

CHAOS AND OPPORTUNITY

Sun Tzu famously said, “In the midst of chaos, there is also opportunity.” Analysing the aftermath of the Dali incident shows us that, within the chaos, lies a profound opportunity to accept a necessary transformation.

By harnessing thousands of data points and using cutting-edge technology, we are transforming raw data into actionable insights that anticipate potential disruptions before they occur.

The Dali incident served as a wake-up call for the marine insurance sector, and today’s commitment to transparency, innovation, and excellence will determine its resilience tomorrow.

“Insurers must protect their exposure with data-driven analytics that prevent unavoidable financial and reputational loss following an unforeseen event. Predictive modelling and enhanced data analytics are here to help insurers anticipate these disruptions and deliver accurate risk assessments at the click of a button.”

The Dali container ship pictured after crashing into the Francis Scott Key Bridge in the Port of Baltimore.”

Stefan Schrijnen

, Chief Commercial Officer at Insurwave,

urges a sharper focus on data and risk management as the marine and energy insurance sector rises to the net zero challenge

The energy transition of the marine and energy industry has introduced a number of new exposures to the market alongside unusual aggregations. For the specialty insurance market, to underwrite and insure these new risks, this exposure information must be tracked and mapped.

CHARTING THE TRANSITION

The IMO advocates that by 2050 the shipping industry should aim to become net zero compliant. However, if business continues as usual, emissions could soar by as much as 130% over the next three decades.

Shipping is now undergoing major change to tackle this issue. Moves towards larger tonnage vessels, the development of shipping routes and advances in fuel technology could drive the widespread transformation that is needed.

The ability to handle and analyse these increased levels of data, using it to create value for all parties involved in an insurance transaction, will be crucial. And we must also recognise that with significant technological change will come a new breed of risks and exposures, each of which will require consideration to mitigate the potential for unwarranted surprises.

Launched in 2021, the Poseidon Principles for marine insurance recognised the importance of data, introducing a standardised methodology for data collection and reporting of emissions from banks’ shipping portfolios.

The overall ambition was to support and facilitate the decarbonisation of the shipping industry. Covering more than 80% of the global ship finance portfolio, the Poseidon Principles now boasts 35 signatories from diverse geographies.

NEW GEOPOLITICAL ERA

The world has started the shift toward a new energy system, ushering in a new era of geopolitics. This raises questions about key assumptions for how countries relate, in terms of economic ties, political alignments, and interdependencies.

As efforts to act on climate change increase, there is a

Stepping up to the Net zero challenge

need to look at all these elements together to understand the emerging geopolitics of the global energy transition. This includes examining how geopolitics and the energy transition affect one another.

As countries shift to renewable energy systems, their international and national policies for energy security will shift. Trade will become less of a security risk for fossil fuel importing countries. Natural resource extraction, while still important to the build-out of renewable systems, will not be a powerful security concern.

TRACKING NEW EXPOSURES

With that said, how can insurers accurately monitor, incorporate and tackle these new exposures that are arising from the energy transition?

In some ways the challenge is akin to that facing the cyber insurance market. Not only is there a lack of historical data; it would be of questionable value, because of the fastchanging nature of the underlying risks.

For example, wind offshore farms pose a particular challenge not only because of their remote location but also because expensive heavy lift vessels are necessary to repair any damage. The construction of offshore wind farms requires major marine operations and relies on special vessels to carry out the installation.

These risks cannot be properly quantified or underwritten without exposure information and data at hand. However, with data management platforms there are opportunities to not only capture this information but actively monitor your exposures in real-time, sharing any changes with all your relevant stakeholders.

Similarly, developments in satellite technology are creating exciting opportunities to use images and sensory data from above for insurance and risk management.

As satellite imagery becomes more accessible and of higher quality, insurers are using the technology to help underwriters better assess and quantify their exposures by combining it with high-resolution aerial and drone imagery to help insurance professionals better understand how their exposures are linked to climate change.

Applied as a tool to monitor remote assets like wind turbines or identify areas at risk of wildfires or floods, space data is well placed to further enhance insurers’ capabilities, with the sector predicted to grow to $1 trillion by 2030, according to McKinsey.

REAL-TIME PROGRESS

As the maritime and energy sectors navigate the complexities of the energy transition, the imperative to adapt and innovate within the insurance industry becomes increasingly apparent.

The trajectory towards net zero compliance by 2050, advocated by the IMO, underscores the urgency of addressing emissions and embracing transformative measures.

However, as the energy landscape evolves, so too must our approach to risk management. The unprecedented nature of emerging exposures demands agile solutions. From offshore wind farms to satellite technology, the ability to harness data in real-time offers a pathway to proactive risk mitigation.

Advancements in real-time exposure monitoring and satellite imagery exemplify the transformative potential of data-driven insights. By leveraging these tools, insurers can monitor exposures and, at the same time, also anticipate and respond to evolving risks effectively.

“As the energy landscape evolves, so too must our approach to risk management. The unprecedented nature of emerging exposures demands agile solutions. From offshore wind farms to satellite technology, the ability to harness data in real-time offers a pathway to proactive risk mitigation.”

Stefan Schrijnen, Insurwave

Clouds gather over solar energy insurance

The sun is shining on solar power in the US. But there are clouds on the horizon, says James Platts, Energy Underwriter at Hiscox London Market

The outlook is bright for solar power in the US, where the amount of electricity generated from the sun is set to increase eightfold by 2030, as the country embraces clean energy to help tackle its greenhouse gas emissions.

President Biden’s Inflation Reduction Act (IRA), passed in August 2022, is driving the construction of more solar farms.

The law is the largest-ever investment in clean energy, and has already kickstarted $10bn in private investment in solar manufacturing, the government says.

There are now so many clean energy generation projects in the pipeline, many of which are solar farms, that there is up to a five-year wait for applications to be connected to their local grid, according to the Lawrence Berkeley National Laboratory.

The insurance industry has been an important supporter of the solar energy sector’s exponential growth, but as more projects start construction or come online, natural catastrophe exposure grows in key hotspots.

STORM WARNING

With more extreme weather predicted in the future, bigger thunderstorms will bring more hailstorms and, according to a recent Power Factors report, almost half of the US’s

renewable energy capacity is in the “Hail Alley” states, where severe hailstorms are common: Nebraska, Colorado, Wyoming, Iowa, Kansas, Missouri, New Mexico, Oklahoma and Texas.

The wide and open spaces in these areas, with ample solar resource, makes them the perfect location for solar farms, but hail is an increasing concern for the future of these projects, particularly in Texas, which is the country’s second biggest producer of solar power. Not only is Texas in the southern tip of Hail Alley, it is also potentially in the eye of more powerful windstorms barrelling in from the Gulf of Mexico.

UNDERESTIMATED RISK?

In March this year, golf ball-sized hailstones badly damaged a solar farm southeast of Houston, Texas – an area not typically deemed to be at high risk of hailstorms according to some natural catastrophe risk models. Given insurer’s current appetite for hail exposure in Texas, only a modest portion of the loss will be borne by carriers.

Hail damage is already a growing problem. In May 2019, 400,000 out of the 685,000 panels at the Midway Solar plant in Texas were broken in a hailstorm, resulting in losses of between $70m and $80m.

Just three years later, in 2022, the renewable energy insurance industry cumulatively experienced recordbreaking losses of up to $400m from hail damage, according to research by consulting firm JS Held.

One of the problems for solar farm owners and insurers alike is that accurate weather data can be hard to find. The JS Held report states: “One of the most notable issues

surrounding historical hailstorm documentation in the official archives is the overall lack of sufficient reporting of severe weather in rural areas.”

Why? In these remote rural areas, there just hasn’t always been anyone around to record if there’s been a hailstorm and how bad it was.

Pecos County, Texas, is home to few people but a lot of solar farms, the JS Held report states. In official weather data for 2007 to 2022, Pecos had an average of more than six days of observed severe hail each year. But it had an average of 20 days of severe weather warnings, when, in that part of the country, there is a high likelihood of hail with bad thunderstorms.

So, “it is likely that in Pecos County, the hail risk is two to three times higher than one would assume when only reviewing reports of hail,” Held suggests.

R&D REQUIRED

Solar panel manufacturers must abide by design safety standards in the US, most notably UL 61730. Their panels must undergo testing, but it is difficult to replicate the conditions of a real-life hailstorm in a laboratory.

There are other limitations too. For example, to pass the UL 61730 standard, panels must withstand being hit repeatedly by hailstones up to 3 inches in diameter, at a maximum velocity of 88mph.

But much larger ice balls have fallen in hailstorms in Texas. The largest hailstone recorded in the state was 6.2 inches wide – nearly seven times the size used in standard tests – which fell in April 2021.

The thicker a solar panel’s glass is, the more it will cost.

“The insurance industry has been an important supporter of the solar energy sector’s exponential growth, but as more projects start construction or come online, natural catastrophe exposure grows in key hotspots.”

James Platts, Hiscox

But it is up to the solar farm designer to assess whether the panels they plan to install would bear up to the hail that falls where the farm will be situated.

It is difficult to know without accurate information on that location the true likelihood of hailstorms, or how powerful those storms may be.

Innovation regarding the strength of panels to withstand extreme weather should be coupled with greater impetus in developing the technology to track the path of heavy storms.

Stowing panels before a hailstorm has been shown to be effective to reducd the damage incurred. But that means the solar farm’s operator needs to know that a big storm is heading its way. More work is needed on developing these tools.

With solar energy set to play a crucial part in meeting more of the US’s energy needs while also helping it achieve net zero, insurers need to work with solar farm designers and operators to ensure it has a sustainable future.

Sharper focus on loss prevention needed

Marco Cappelluzzo , (left) underwriter, marine cargo, and Captain Samson Rathaur , marine risk engineer, Liberty Specialty Markets, explore the risks generated by the transition to new forms of power. A sharper focus on loss prevention is needed as the scale and complexity of the risk environment escalates

In Italy, in 2023, 44% of net electricity production came from renewable energy sources (wind, solar, hydroelectric, biomass and geothermal), according to the latest data processed by Il Sole 24 Ore and published by Terna.

The figure is strongly linked to a rising trend of the construction of new plants for the production of green energy. More than 200 projects have already been approved for the five-year period 2025-2029 for the construction or expansion of new wind, solar or geothermal plants.

It is important to mention the valuable support given by the PNRR, for which a total of €23.78bn are dedicated to renewable energy, hydrogen, grid and sustainable mobility.

The plan, in addition to support linked to the increase in RES electricity production plants (with a specific focus on agrivoltaics and innovative plants, especially offshore), aims to spread hydrogen and develop leadership in the industrial field linked to the RES supply chain.

This last matter, which is now hotly debated at European level, is of fundamental importance if we consider that, for example, some 70% of the production of solar panels takes place in Asia, especially in China.

The dominance of these markets, in addition to the lack of geographical competitiveness, means that supply chain risks are becoming increasingly critical and difficult to manage.

RISKY TRANSFORMERS

The increasing demand for electricity from RES presents companies and their insurers with multiple challenges and perhaps none is more relevant than the production, transport and maintenance of transformers.

Transformers take electricity, turn it into a magnetic field, and then turn it back into electricity, allowing power to be

transmitted over long distances with greater efficiency and less energy loss across the entire distribution network.

In a world where technology, and therefore the supply of electricity, is more important than ever, the role of transformers is critical, with a market share worth $22.83bn in 2022 and an expected annual growth rate of 7.1% for the next six years.

Such is their importance for most power generation projects, power plants or renewable energy grids, that transformers are listed as “critical items”.

If lost or damaged, they could cause unacceptable delays to a project. Lead times for a transformer can range from six months to a year or more, and in 2023 there was a further increase in the replacement time of these assets.

SHIFTING NATURE

One reason for the changing demand is the shifting nature of our power grids.

In many territories, these need to be designed or upgraded to the capacity necessary to handle modern power demands.

This is especially evident in the US, which is seeing the migration of power production away from California eastward towards Texas, a move likely influenced by varying environmental regulations across individual states.

This variance in policy is, perhaps less visibly, influencing power generation and distribution globally, with similar challenges arising from the UK to Latin America.

Major renewable energy projects are constructed far away from built-up areas. As a result, the distance that electricity needs to travel to end users has also increased.

This is the backdrop against which insurers and the shipping industry manage the risks of transporting ever-larger equipment critical to construction to meet the require-

“The increasing demand for electricity from RES presents companies and their insurers with multiple challenges, and perhaps none is more relevant than the production, transport and maintenance of transformers.”

ments for modern megaprojects. For such a project, a transformer can weigh more than 300 metric tonnes and be the size of a small house.

BIGGER IS RISKIER

These transformers, which can be fragile and vulnerable to shock, g-forces and moisture, now need to be bigger to handle the volumes of electricity flowing through them, allowing energy to travel greater distances to its destination.

Those factors have increased the risk of damage to the transformer during a long and complicated journey, especially when cargo needs to be moved on multiple forms of transport. Road transport remains the most significant risk.

For example, we see transformers being moved from a production site in South Korea, shipped to Bristol, but then needing to move to Essex.

All stages of the journey can pose transportation risks and there are multiple crunch points when fragile cargo can be damaged during loading and unloading.

It might even be necessary to dismantle elements of the transformer to meet local transport requirements. We not only face growing logistical challenges because

of the increased size of and demand for transformers, but shipping and port capacity is already at high levels of demand, meaning we must make sure that insureds continue to be supported during the project planning stage.

THE VALUE OF PREVENTION

It is essential that insurance companies continue to adapt to changing risk scenarios and improve their offer of solutions for companies.

A comprehensive approach to “risk engineering” becomes increasingly important, going beyond the objective of “loss control” to include a holistic view of the risks from start to finish.

Elements such as a careful assessment of the route (road, river, rail) that the most voluminous goods will have to face, the adequacy of the packaging, the experience and expertise of logistics operators (both land and sea), are just some of the many factors that help us to mitigate and reduce the risks related to the transport of project cargo.

We believe that this new paradigm must provide for a rapprochement between insurance companies, brokers and customers and that it provides for the consolidation of longterm partnerships based on the common goal of the best possible risk management.

Insuring the energy transition: Managing risk and building resilience

By Elliot Lyes , Active Underwriter, AXIS Energy Transition Syndicate 2050

The energy transition is picking up pace as businesses, public bodies and governments implement their strategies to reduce carbon emissions and meet climate-related goals. Through risk transfer and risk management solutions, the insurance industry’s responsibility in supporting organisations as they try to achieve their targets and address one of the world’s greatest challenges is significant and not straightforward.

To fulfil our role, full consideration of the multilayered risks and nuanced differences in transition strategies and progress across industries and territories, right down to individual organizations, is an essential first step for insurers in developing the most appropriate, elevated solutions to support policyholders on their journeys to net zero.

As a specialist insurer, identifying the intricacies of a non-standard, often complex risk, is in our DNA. We know that in a rapidly evolving risk landscape we cannot analyse and price for risk today based on assumptions from the past.

The energy transition is one such scenario that calls for fresh eyes, open minds, and a disciplined underwriting pen. Our own industry like many others is adapting to cope with the direct impact of climate-related changes in weather patterns on how we conduct business.

And to support our customers, this transition requires insurers to demonstrate a willingness to assess appetite for risk against their longer-term ambitions, rather than through the lens of a standard 12-month insurance policy lifespan. It also demands that we look holistically across the cross-class exposures that a customer will inevitably experience as they journey towards a lower carbon model.

INVESTMENT BOOM

The levels of investment globally in the renewables and lower carbon space reflects the scale of the shift underway – and the opportunity it represents to the insurance industry.

To put that into context, achieving the overarching goal of net zero by 2050 will require unprecedented injections of

capital, with the International Energy Agency (IEA) forecasting that the $1.7tn of investment in clean energy in 2022 will need to rise to $4.5tn of investment each year by the early 2030s. And, according to consultancy McKinsey, global investment in the energy transition could reach 8.8% of GDP this decade and average 7.5% each year to 2050.

To keep up with demand and deliver what is needed to meet climate goals, countries at last year’s COP28 agreed to triple global renewable energy capacity by 2030 and double energy efficiency measures. This level of investment is both a daunting challenge and a spectacular opportunity for the insurance industry to help to facilitate the transition and one it cannot afford to pass by.

2050 GOALS

At AXIS, and in line with our ambition to be the leading specialty insurer, we, like many peers in the market, have taken steps with our underwriting appetite and corporate actions to better align with a low-carbon economy.

Most recently, this has come to bear in the launch of our second syndicate at Lloyd’s, AXIS Energy Transition Syndicate 2050 (S.2050), in April of this year.

Our objective in setting up this new platform was specifically to provide capacity for assets and activities that directly support carbon emission reduction through the replacement or displacement of fossil fuels.

Through a standalone syndicate we aimed to deliver a clear statement of intent around our appetite and to make it easier for brokers seeking transition solutions to trade with us and get multiline solutions their clients need. In a few short months, we are witnessing the strength of interest in cross-class insurance solutions for energy transition risk – and just how eclectic those risks are.

The submissions we are receiving from brokers through S.2050 directly reflect the expected diversity of risks, with the lifecycle of required policies varying significantly by project, territory and scale.

Our very first bound risk was for a major US-based construction asset and we have subsequently received underwriting submissions and written business across differing industries and not just from within the traditional energy space.

These have included: EV storage and transit risks; green steel and green hydrogen projects; and European geothermal activities, among others.

As expected, S.2050 has also prompted some fascinating

discussion with brokers about the veracity and effectiveness of some new and innovative technologies and activities, as well as their likely contribution to lowering carbon emissions.

No one said this was going to be easy. Transition risk is complex and we will continue to push for open dialogue with our partners and to evolve our portfolio as it develops and grows.

TRANSITION LIFECYCLE

The need for a “holistic approach” is more than lip service when insuring the assets or activities associated with a company’s energy transition. In a highly competitive arena in which transition solutions often involve nascent technologies, the lifecycle may start with covering the intellectual property at the point of conception.

Insurance also plays a vital role in helping to secure financing for new technologies and in reducing the impact of political risk on investors. We know from our own research that obtaining financing is often a primary obstacle for developers in making further investments in prototypical technologies, making insurance all the more important.

For insurers, this requires frank conversations with customers and their brokers to develop a deep understanding of the tech, the strategic approach and culture of the insured.

Insurable risks in the construction phase of a project may include delays or overrunning costs and then, once operational, insurance is essential to provide a financial

“This transition requires insurers to demonstrate a willingness to assess appetite for risk against their longer-term ambitions, rather than through the lens of a standard 12-month insurance policy lifespan.”

support mechanism in the event of malfunction, underperformance, terror or cyber threats, or injury.

INNOVATION AND COMPLEXITY

From credit to construction, renewable energy to political violence, cyber to cargo, it is essential that, as specialist insurers, we demonstrate an elevated understanding of our customers’ needs through an approach to underwriting that reflects the innovation and complexity involved with their transition journeys.

In truth, we are all learning more every day about the risks and the effectiveness of new technologies and initiatives in tackling carbon emissions. We are invested in working with our customers, distribution partners and wider society, to develop our understanding. Where we can, we will help to de-risk elements of the transition journeys and help to enable investment, innovation and progress.

In supporting the transition, insurers have a significant responsibility and opportunity ahead. To reiterate, this requires our industry to elevate our offering to customers and act responsibly to support the global efforts to cut carbon emissions.

We need to go beyond the traditional insurance structure focused on the lifespan of a single policy, by providing cross-class solutions tailored to the needs and the lifecycle of individual organizations’ energy transition journeys.

Uncertain world of emissions trading

The shipping industry is facing up to new emissions trading rules. These are unchartered waters that will require careful navigation advises,

Marianna Katsimicha , Claims Executive, Shipowners Claims Bureau, Inc

As from 1 January 2024, the European Unions’ Emissions Trading Scheme (EU ETS) has been extended to also cover the shipping industry which applies to ships of 5,000 GT and above. Briefly, the EU ETS is an emission allowances (EAs) “cap and trade” scheme for CO2 and other greenhouse gases (GHG) emitted from the burning of ship’s fuel.

This allows shipowners to receive or buy emissions allowances corresponding to these emissions, which they can subsequently trade, if and as needed, while always remaining within the “cap” set by the relevant EU Regulation.

As the cap decreases through the years it provides an “incentive” to shipowners to decrease their emissions thus aiming for a gradual reduction and ultimate elimination of CO2 and other GHG emissions.

WIDE SCOPE

The EU ETS applies not only to ships flying the flag of EU states but all ships calling at EU ports for commercial purposes (bunker calls, crew changes, drydock or other supplies are excluded from its scope), irrespective of the nationality of the registered owner.

The impact is wide-reaching as the EU ETS considers the entire voyage and fuel consumption from the transit in and out of the EU port in calculating the emissions.

As per the EU’s Regulation the registered owner of the vessel is ultimately responsible for complying with the EU ETS (“the polluter pays”). However, ISM managers can also be empowered to act in the same capacity.

PRACTICAL APPLICATION

One ton of CO2 emitted (or the equivalent quantity of other GHG) corresponds to one unit referred to as “allowance” or EA.

Shipowners are required, for each individual ship, to obtain EAs corresponding to the quantity of the emissions of that ship

within a year and submit these to the authorities (as designated by each member state) the following year.

The EAs can be either purchased in primary and secondary markets in the form of a stock exchange already set up for other industries for which EU ETS have so far been applied, or obtained through transfer from their counterparties, such as charterers (more on this below).

Shipowners will need to monitor and report to the authorities the amount of the emissions on a yearly basis as verified by an independent verifier. This is normally a classification society although due the surge in demand other organisations are now allowed to become accredited for verification.

Based on this verified data, shipowners shall receive the “bill” as to the amount of EAs to be surrendered to the authorities. In practice, shipowners must have obtained the adequate amount allowances in advance to ensure timely surrendering of EAs and avoid any penalties.

COST OF EAS

The cost of EAs is not fixed and is subject to fluctuations (varying from E60-100 per EA for the last two years). The EAs are expected to constitute a significant exposure in owners’ books because they are dependent on the vessel’s emissions profile equipment and number of EU calls, which can vary from year to year.

Such exposure will increase in the coming years as, by 2026, owners will be obliged to cover 100% of their emissions (compared to 40% for year 2024 and 70% for year 2025 as per the regulation). Advance purchasing of EAs on behalf of owners may be a strategic option as the cost of EAs is likely to increase closer to the surrendering days.

NON-COMPLIANCE

The consequence of non-compliance remains murky. The

“Given the quasi-speculative and untested nature of the Bimco and other clauses, a spike in the charterparty/FDD disputes is to be expected. Questions on existing insurance policies might arise.”

Marianna Katsimicha, Shipowners Claims Bureau, Inc.

member states have gradually been implementing the EU ETS Regulation in their national legislations including Greece.

However, the practical application of such legislation at the state level (especially in terms of reporting and surrendering procedures and timelines, but also some of the specifics of the EAs calculations) remains on a theoretical level and untested.

This is especially the case given that the first EAs reporting and surrendering is not expected to take place before AprilSeptember 2025. The early expectation of non-compliance, as understood from other sectors, varies from financial penalties to a potential ship detention.

INTENSE NEGOTIATIONS

There appears to be a common understanding in the shipping industry that the party in the maritime adventure providing and paying for the fuel (the fuel being the pollutant cause) is the party that should bear the cost of EAs.

In the context of a time-charter party, it would typically be the charterer. As such, owners and time charterers - ahead of the 1 January implementation date - have been involved in intense negotiations over the allocation of responsibilities regarding EAs and the potential liabilities which may arise from the trade.

Given the unknown practical, logistical, and legal implications of EU ETS on shipping because of the recent implementation date, any negotiations and agreement of clauses dealing with EAs are largely theoretical and assumed. They will likely give rise to future disputes.

A popular charter clause developed to address the new scheme is the BIMCO ETS Allowances Clause for Time Charterparties. However, many untested makeshift or bespoke clauses have also appeared in the market.

Briefly, the BIMCO clause provides that the charterer is responsible to owners monthly for the appropriate EAs based on owner’s representation of the ship’s emissions data. EAs corresponding to emissions during off-hires are to be borne by owners.

In the case of charterers’ default, owners have the right to suspend performance of their obligations under the charterparty until payment is made – this part of the clause has been greatly resisted by charterers. The party ultimately responsible vis-à-vis the authorities remains the owner.

There are still significant matters for consideration in negotiating these clauses. The Bimco clause does not provide for a resolution mechanism in case of disputed off-hires, nor does it specify the price to be paid for EAs.

Will every dispute result in arbitration? Without further specificity will charterers be obliged to pay any price for EAs purchased by the owners (such as is the case for bunker prices)? If there is a test for reasonableness, what is it? Will EAs constitute a maritime lien?

Charterers have been pushing for EA settlement on

“The EU ETS applies not only to ships flying the flag of EU states but all ships calling at EU ports for commercial purposes (bunker calls, crew changes, drydock or other supplies are excluded from its scope), irrespective of the nationality of the registered owner.”

an annual basis and closer to the surrendering deadline. Depending on the creditworthiness of charterers or unforeseen circumstances (for example bringing a sooner end to the CP), owners could be significantly exposed.

INSURANCE IMPLICATIONS

Given the novelty of EU ETS in the shipping industry, its uncertain and practical implications, and the untested legal position, together with the significant financial exposure, the insurance implications of EU ETS are also under consideration.

Given the quasi-speculative and untested nature of the Bimco and other clauses, a spike in the charterparty/FDD disputes is to be expected. Questions on existing insurance policies might arise.

While under certain insurance policies owners can, under specific circumstances, recover the cost of fuel consumed because of the insured peril, it is very unlikely that owners will be able to recover the extraordinary cost of the EAs corresponding to same quantity of fuel in the absence of bespoke wording or explicit agreement.

Bespoke wordings in loss of hire and H&M policies to cover or exclude against risk of EAs will probably be required.

Consequently, new insurance products have been appearing in the market that offer cover to owners against unexpected exposure in EAs from unforeseen events that are not clearly regulated or covered under the charterparty.

Similarly, there is talk in the market of potential insurance products covering the price fluctuations and differentials between the purchase and the surrendering or reimbursement price of EAs.

Five months into the application of EU ETS regulations, the industry feedback has not been sufficient to assess the problematic areas and potential solutions. It remains to be seen how the shipping industry will navigate these unchartered waters and find the needed clarity and balance.

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Greece is a traditionally and profoundly maritime nation and shipping lies very close to Greek hearts. Greece is also a civil law jurisdiction, which means that changes in law (at least fundamental changes) can only take place when the legislature so decides.

Such a decision was formalised in February 2023, when the new Greek Code of Private Maritime Law, or New Code, was passed.

The New Code replaced the original code which dated back to 1958 (Old Code) and brought about a radical overhaul of the framework of shipping trade.

The purpose of this overhaul was, predominantly, to bring Greek legislation up to speed with international developments and current shipping practice, in which English law sets the pace.

The changes in the New Code also affected marine insurance and, while the core of the Greek law on marine insurance remains essentially the same, the revisions in the New Code made the law much more user-friendly.

This article will not provide chapter and verse of all changes regarding marine insurance. Rather, it will highlight some interesting and important amendments.

FREEDOM OF CONTRACT

Save for a ‘hard’ core of limited provisions that are at the essence of what can be insured and how abandonment works, it is now made clear that the parties are free to shape the terms of the policy.

This could give insurers greater flexibility in securing waivers of rights and defences provided by Greek law, although the validity of waivers can be scrutinised by Greek courts.

POLICY TERMS

There is now prescribed content for marine insurance policies. Care should be taken to ensure that the statutory requirements are met.

POLICY DURATION

Voyage hull policies: Under the Old Code, cover under a voyage policy extended from loading or ballasting until discharge. Now, cover extends from commencement to completion of the insured voyage. While the change appears more sensible at first blush, one could imagine disputes as to what constitutes commencement or completion of a voyage. Cargo policies: The detailed provisions of the Old Code have been revised. Cover now extends from receipt of cargo by the carrier for carriage until the later of (a) delivery; or (b) 30 days from discharge.

One notes a convergence between current provisions on cargo insurance and the Hague-Visby Rules. For cargo insurers to be liable for risks without the prospect of subrogated recovery, this will need to be specifically

A welcome step forwards

provided in the cargo policy. This should allow for a more rational assessment of risk and likelihood of subrogated recovery and, consequently, premium levels.

INCREASED VALUE (IV)

The New Code expressly provides for IV cover, but this must not exceed 20% of the insured value. IV cover must also be justified on reasonable business grounds which must be expressly identified in the insurance contract.

While 20% is within the scope of what is ‘market’, the other two requirements suggest that IV cover is a matter for a caseby-case assessment (rather than standard practice to cover for usual fluctuations in value).

In the absence of an express acknowledgment by the insurer that it found the grounds presented to it (which must be identified) reasonable for granting IV cover, one can see the potential for disputes as to what circumstances make IV cover a ‘reasonable’ choice.

WAR RISKS

War risks are now expressly carved out from the scope of marine policies and must be specifically agreed. However, Greek law places the burden on the insurer to prove that a loss occurred because of a war risk and not an ordinary marine peril.

ABANDONMENT

The law of abandonment has been re-shaped quite significantly.

1. The threshold for a CTL remains at 75% of the vessel’s insured value but qualifying expenditure is now the one necessary for the vessel to regain the class status it had prior to the occurrence of the insured peril.

2. The assured has four months to tender notice of abandonment (NOA).

Timon Karamanos, (left) Partner, and Vassilis Mavrakis, (right) Senior Associate, Hill Dickinson, discuss the new Greek code of private maritime law

3. Detention by a foreign power or due to war risks is now a CTL event if it lasts for 12 months.

4. The NOA for a vessel and its rejection must be registered with the vessel’s registry. This provision raises various questions:

a. Will it apply to policies not governed by Greek law? Quite possibly. It refers to matters of registration, where the law ordinarily applicable is that of the country where the registry is found.

b. Is the registration necessary to give effect to the NOA and its rejection? Probably not. The NOA on its own does not affect property rights in the vessel and appears to only inform third parties of the possible change of ownership.

5. Disputes regarding the assured’s right to abandon are subject to the procedure reserved for security measures. This should ensure prompt resolution but whether this procedure is fit for potentially complicated questions common to CTL claims will need to be tested.

OVERALL ASSESSMENT

The modernisation of Greek shipping legislation was long overdue and (although there are wrinkles that will need to be ironed out through practice) the New Code seems to have met its mark.

We at Hill Dickinson pride ourselves on our strong relationships with the Greek shipping law community and wish

“The modernisation of Greek shipping legislation was long overdue, and (although there are wrinkles that will need to be ironed out through practice) the New Code seems to have met its mark.”

to extend our cordial congratulations to our dear friends and colleagues at Greek law firms, who helped lay the foundation for Greek shipping law to thrive in the years to come.

The question of whether litigating in Greece is preferable, is more nuanced. Our firm is regularly instructed in marine insurance claims governed by English law and has secured high-profile victories for our clients in the English Courts (The Renos, The Win Win).

Our experience suggests that there are horses for courses. There are certain cases (technically complex or witness-heavy claims), where litigating in England has clear advantages. But, we have also seen good claims being abandoned because the cost of pursuing them in the English courts was disproportionate to the sums at stake.

Greek Code of Private Maritime Law: A new chapter

By Agapi Terzi, Regional Claims Manager – Greece, The Shipowners’ Club

For many decades Greece has been at the top of the list of ship owning countries, with 20% of the world’s commercial fleet controlled by Greek companies and more than a thousand established offices offering ship management, ship brokerage, insurance, legal and financial services.

This maritime dominance provoked the enactment of the Greek Code of Private Maritime Law (3816/1958) in 1958 which aimed to address the needs of all shipping activities within the Greek jurisdiction.

More than 65 years later, a new chapter begins for the Greek (maritime) jurisdiction and the Greek shipping industry, as the new Code of Private Maritime Law came into effect a little more than one year ago on 1 May 2023.

SIGNIFICANT CHANGES

In an effort to ensure that domestic law guarantees the protection and rights held within the various international conventions, there are significant changes that are being implemented, some of which are particularly relevant to the scope of the Club’s protection and indemnity (P&I) and legal costs cover offering.

In particular the changes include:

> The definition for ships and ‘static’ crafts (depending on whether the vessel is motile or stationary) has now been introduced;

> The use of electronic shipping documents (B/L, other cargo documents and charterparties) is permitted; and,

> Damages for wrongful arrests are now available (pro visions now include the detention of a ship as provisional order in anticipation of a judgment for conservative seizure).

Under the new code, maritime liens:

> Allows for auction of cargo under lien;

> Allows for recovery from statutory liens over ship’s

bunkers; and,

> Provides that debts arising from charterparties take priority.

There are also significant changes to limitation of liability, including:

> Introduction of a single set of limitation procedural rules to apply for all international conventions in force in Greece;

> Club letters of undertaking are acceptable when constituting a limitation fund in addition to cash deposits and bank guarantees;

> The right of limitation is available for all claims, charges, fines, dues apart from pollution fines;

> Euribor rate plus 4% interest to apply on the limitation fund amount until it is constituted in the national currency;

> A two-month time bar in challenging the right to limit;

> Introduction of limits of liability for ships below 300 gross tonnage at SDR1,000,000 for loss of life/personal injury, and SDR500,000 for other claims;

> General average is now in line with York Antwerp Rules 2016;

> Owners are permitted to claim directly from subcharterers the freight due under the head charterparty;

> Owners are not to be held liable for stevedore damage if there is a statutory obligation to use a specific stevedoring company;

> Jurisdiction clauses where the carrier’s liability is significantly limited compared to the Hague-Visby Rules will be ineffective; and,

> Time bar extensions are allowed, without prejudice to the provisions of international conventions.

ENHANCED TRANSPARENCY

Finally, to enhance transparency and regulate modern forms of shipping activities, some of the key provisions of the new Code touch on operational aspects such as:

> The Digitalisation of the Ship Registry – hard copies and handwritten entries are replaced by electronic records, whereas records to be accessed and certificates to be issued by digital systems;

> Provisions for simple and preferred ship mortgage;

> Introduction of definitions for ship operations;

> Definitions for administration and marine agency; and,

> Update of chartering provisions.

The general perception among Greek maritime law practitioners is that the amendments to the Code of Private Maritime Law are a step in the right direction, as the older regulations were considered as incomplete and in part outdated.

The main purpose of the new Code is to align the national law with international conventions already in force and offer better protection to seafarers by providing a more concrete framework supporting their working life. These changes are inevitably boosting legal certainty, enhancing transparency and better regulating modern forms of shipping operations.

A special thanks to the Shipowners’ Club’s legal correspondent Rediadis Law Firm for contributing to this article.

“These changes are inevitably boosting legal certainty, enhancing transparency, and better regulating modern forms of shipping operations.”

Agapi Terzi, The Shipowners’ Club

Judge, jury and executioner

George Chalos, partner at Chalos & Co, explains how the ever-evolving US sanctions regime works, why operators need to keep abreast of developments and cannot use innocence or ignorance as an excuse for non-compliance

The US exercises jurisdiction over numerous regulatory and legal issues within the maritime space despite a general rule against extraterritoriality. Nowhere is this more acutely felt than in the US sanctions regime.

The US Treasury Department, established in 1789, has explained that the department is responsible for “promoting economic prosperity and ensuring the soundness and security of the US and international financial systems”.

It has also become the preeminent enforcer of US sanctions, seeking to safeguard US financial systems by “implementing economic sanctions against foreign threats to the US and identifying and targeting the financial support networks of national security threats”.

DEFINED PERSONS

US law defines the following “persons” which are subject to US sanctions controls:

• Organizations formed in US (including foreign branches); US citizens, permanent residents, approved asylees, all US persons, covered wherever located; and foreign nationals located in the US (31 CFR § 560.314);

• Non-US persons and entities to the extent they deal in items subject to U.S. jurisdiction (50 USC § 1705); and,

• Foreign entities/subsidiaries controlled by a US person (31 CFR §§ 515.329; 560.215).

In reality, these defined “persons” have been expanded to reach every corner of the globe. A significant way in which the Treasury Department carries out the goals of its mission and enforces sanctions is through the Office of Foreign Asset Control (OFAC) and the Specially Designated Nationals (SDN) list.

OFAC interprets Executive Orders issued by the Executive Branch (ie the US President) and statutes issued by Congress to identify prohibited activity engaged in by entities or individuals. It maintains a list of individuals and companies owned, controlled by, or acting for or on behalf of, sanctions targets. If a vessel, company, or individual finds themselves on the SDN list, then all US based assets (including US dollars on the move through international bank accounts), will be blocked and all US persons and companies are prohibited from dealing with SDN entities.

RUSSIAN FOCUS

This activity plays out in real time in several ways. For example, on May 1, 2024, OFAC designated 29 individuals, 253 entities, and 16 vessels for the SDN list due to their alleged

“support of Russia’s military-industrial base and chemical and biological weapons programmes; the designations include Russian individuals, entities and vessels as well as companies and individuals in third countries that are supporting the Russian military-industrial base and chemical and biological weapons programmes.”

In addition, OFAC has recently issued a new determination letter updating the list of items of a Russian Federation origin which are prohibited from import into the United States pursuant to Executive Order (E.O.) 14068 of March 11, 2022. Specifically, OFAC has expanded the list of prohibited and sanctioned imports to include aluminum, copper, and nickel as of April 13, 2024.[3]

EVER-CHANGING LANDSCAPE

With the ever-changing landscape of US sanctions, OFAC determinations, and SDN list designations, maritime actors and their interested underwriters must be especially sensitive to and aware of the evolution of what is permitted and what is not. From a practical standpoint, almost all OFAC determinations relating to the import and export of commodities will have a “grandfathered-in” component, giving a grace period for proper compliance.

“What has been made absolutely clear… is that any attempt to claim innocence through ignorance of sanctions (ie lack of knowledge of cargo origin, trade partners, prohibited bank accounts etc.), will not be a defence.”

For example, the OFAC update to prohibit import of aluminum, copper, and nickel does not apply to such products which were produced prior to April 13, 2024. In addition, many times OFAC will simultaneously issue certain general licenses in conjunction with sanctions announcements which provide enumerated exceptions for particular trades and business which are excepted from the sanction.

GENERAL LICENSE

Last autumn, OFAC issued General License No. 44 which eased certain Venezuela related petroleum sanctions for a six-month period. On April 17, the US announced that the General License would not be extended because of the Venezuelan government’s failure to meet the standards set out by the Biden Administration, and as a result, GL No. 44 would automatically expire at 12:01 AM Eastern on April 18, 2024.

Notwithstanding, the US gave a 45 day wind-down license to permit private entities to come into compliance with the reinstituted sanctions.

OFAC generally publishes FAQs as well to aid the industry in understanding what activity is prohibited and what is not. If a vessel, company, or cargo is not covered by the general license or the compliance grace period, then a specific license can be applied for through OFAC to receive appropriate permission from the US authorities for specific activity is on a case-by-case basis.

What has been made absolutely clear, however, is that any attempt to claim innocence through ignorance of sanctions (ie lack of knowledge of cargo origin, trade partners, prohibited bank accounts etc.), will not be a defence. The US government requires sanctions compliance and law-abiding companies to either comply, or face the risk of a ‘civil death’ by being designated to the SDN list.

“You can’t pick and choose”

X-Press Pearl off Sri Lanka on 2 June 2021.

Simon Rainey KC, Natalie Moore (bottom left) and Joseph Gourgey, (right) of Quadrant Chambers explain the meaning of a recent useful restatement that third parties that sue an insured’s insurers direct are as much bound by the terms of the insurance contract as the insured

Will a claimant, wishing to bring proceedings against an indemnity insurer abroad on the basis of the actions of its insured, be bound by the terms of the underlying insurance contract even though it is not a party to it?

This was the question considered by the Commercial Court in The London Steam-Ship Owners’ Mutual Insurance Association Ltd v Trico Maritime & Others [2024] EWHC 884 (Comm) in a claim for a final anti-suit injunction and declaratory relief.

Bright J, applying the decisions of Shipowners Mutual P&I v Containerships Denizcilik (The Yusuf Cepnioglu) [2016] EWCA Civ 386 and QBE Europe SA NV v Generali Espana de Seguros [2022] EWHC 2062 (Comm), held that a third party seeking to claim the benefit of an insurance contract to bring proceedings against an insurer will be bound by its terms, including the arbitration agreement contained therein.

He accordingly granted a quasi-contractual final anti-suit injunction.

Bright J also considered the effect of a “pay to be paid” clause in the insurance contract, granting a declaration to the effect that the indemnity insurer was under no liability to cargo interests unless, and until, they had been paid in full by the insured.

BACKGROUND

The claim arose out of the sinking of the container ship the

The vessel was insured by the London Steam-Ship Owners’ Mutual Insurance Association pursuant to a contract of insurance incorporating the Club’s rules.

Various plaintiffs in Sri Lanka who asserted an interest in the cargo on board brought proceedings in May and June 2023 against both the vessel interests and the Club.

The Club consequently applied for a final anti-suit injunction and declaratory relief, in support of its right to be sued only by a claim referred to arbitration in London, subject to the terms of the insurance contract.

THE DECISION

In considering whether to grant the injunction, the Court relied upon the following legal principles, derived from the Court of Appeal decision in The Yusuf Cepnioglu and Foxton J in QBE Europe:

1. First, it is necessary to classify the right being asserted by the claimant in the foreign proceedings, by reference to English conflict of law principles. This is to ascertain whether the foreign claimant is seeking to enforce a contractual obligation derived from the contract of insurance or is advancing an independent right of recovery under a local law. If the former, and if the insurance contract is subject to English law, then the right being asserted must be governed by English law;

2. If so, the foreign claimant is treated as bound by the insurance contract, including the arbitration provisions. This is on the “benefit and burden” basis. The foreign claimant cannot enjoy the benefit of the right derived from the insurance contract without complying with the associated obligation to pursue that right only in arbitration; and,

3. If stages (1) and (2) lead to the conclusion that the claim is linked to the enforcement of the insurance contract such that the foreign claimant is bound to observe the arbitration agreement in the insurance contract, then it is open to the insurer to apply for an anti-suit injunction against the foreign claimant. The court will generally grant an anti-suit injunction unless there are good reasons not to do so.

NO DIFFICULTY

Applying these principles to the present case, Bright J noted that the evidence adduced at the trial showed that the cargo claimants’ claims against the Club were brought solely on the

basis of the Club’s liability “as the insurer”.

This arose out of, and necessarily depended on, the terms of the insurance contract. He therefore had no difficulty in finding that the Club was entitled to be sued only by reference to arbitration in London.

In considering whether there were any good reasons not to grant an injunction, the court found that:

(1) The Club had not submitted to the jurisdiction of the Sri Lankan court despite entering an appearance because it made clear that it contested the jurisdiction of that court; and,

(2) while the application could have been brought sooner, the Sri Lankan proceedings had not advanced materially or at all on the merits, nor could there be any reasonable perception of material interference with those proceedings.

The court concluded that against this background and “in circumstances where the cargo claimants decided not to appear in this court and assert the existence of a good reason not to grant the antisuit injunction sought by the Club”, there was no good reason not to grant the anti-suit injunction.

Bright J also considered the Club’s claim for a declaration

that it was entitled to rely on the “pay to be paid” clause in the insurance contract as against the third party cargo claimants. Following the House of Lords decision in The “Fanti” and The “Padre Island” [1991] 2 AC 1, he granted the declaration, stating that the Club was to be under no liability to the cargo claimants unless and until their claims had been paid in full by the insured.

l Simon Rainey KC, Natalie Moore and Joseph Gourgey acted for the successful claimant, instructed by Alistair Johnston, Maria Borg-Barthet and Richard Guy of Campbell Johnston Clark.

“The claim arose out of the sinking of the container ship the X-Press Pearl (pic below) off the coast of Sri Lanka on 2 June 2021.”

Risk of conflicting conventions

BIMCO, the International Chamber of Shipping and several states have called on the IMO to solve legal inconsistencies. Herman Steen , (top left) Partner, and Gisken Andersen , Associate at Wikborg Rein focus on what needs to be done

BIMCO has, together with the International Chamber of Shipping, Norway, Bangladesh, India and Pakistan, urged the International Maritime Organisation (IMO) to solve possible conflicting requirements between the Hong Kong Convention and the Basel Convention ahead of the entry into force of the Hong Kong Convention on 26 June 2025.

The potential conflicts may expose shipowners and others to severe consequences, particularly when recycling ships in the major ship recycling countries in South Asia such as Bangladesh, India and Pakistan – even if the ships and facilities comply with the Hong Kong Convention.

The Hong Kong Convention will change the global legal framework on recycling and is expected to improve the standards on safe and environmentally sound ship recycling particularly in South Asia.

But there are potential conflicts between the Hong Kong Convention and the Basel Convention, which the IMO has now been called on to solve.

WHAT IS THE PROBLEM?

Once the Hong Kong Convention enters into force, it will require ships flagged in contracting states to comply with the convention, including only to be recycled at facilities authorised under the convention. It will also require recycling facilities in contracting states to be authorised by national authorities and to operate in compliance with the convention.

Once a ship has obtained an International Ready for Recycling Certificate (so-called IRRC) under the Hong Kong Convention, which is valid for three months, there is however a risk that it will, at the same time, be considered as hazardous waste under the Basel Convention.

The Basel Convention does not directly apply to ship recycling, but does control the movement of hazardous waste across international borders and its disposal.

Ships are, however, normally considered as hazardous waste under the Basel Convention when they are heading for recycling. Shipowners must then seek prior informed consent from the exporting, transiting and importing state if they are contracting states, which may take up to 60 days, during which the ships must remain idle in the exporting state.

The Basel Ban Amendment goes one step further and prohibits the export of hazardous waste to non-OECD states. That would prohibit ships from being exported from an OECD state to be recycled in any of the major ship recycling states in South Asia such as Bangladesh, India, Pakistan. This would be the case even if the ships and the facilities comply with the requirements of the Hong Kong Convention.

This would entail a risk that the ship could be arrested and, as has been seen in several cases particularly in the Netherlands and in Norway, can result in severe sanctions for the shipowners and others involved, including several months of imprisonment of key personnel.

POTENTIAL SOLUTIONS

Some believe that the Hong Kong Convention will take precedence over the Basel Convention. This is because the Basel Convention allows other instruments to supersede it if they impose waste management requirements not less environmentally sound than those under the Basel Convention. The Hong Kong Convention is also a more recent convention that regulates a more specific subject matter. However, whether the Hong Kong Convention takes precedence is disputed by some, including several NGOs.

The lack of clarity regarding the relationship between the Hong Kong Convention and the Basel regime creates unwanted uncertainty and risks for stakeholders involved. These are both in respect of owners of ships that are soon to be recycled and the recycling facilities that are now

“The lack of clarity regarding the relationship between the Hong Kong Convention and the Basel regime creates unwanted uncertainty and risks for

stakeholders involved.

These

are both

in respect of owners of ships that are soon to be recycled and the recycling facilities that are now investing to improve their facilities.”

investing to improve their facilities.

EU RESOLUTION?

A potential resolution could draw inspiration from the EU’s approach to the interface between the EU Ship Recycling Regulation and the EU Waste Shipment Regulation. While the former is based on the Hong Kong Convention and the latter on the Basel regime, the EU has established that the Waste Shipment Regulation does not apply when the Ship Recycling Regulation does.

Whether such a solution is feasible in practice in connection with the Hong Kong Convention remains to be seen. Some NGOs have advocated for the opposite, namely that it should be established that the Basel regime should take precedence over the Hong Kong Convention.

The recent submission to the IMO is, in any event, a welcome development, as this will hopefully result in a resolution of the issue. Addressing these legal challenges will be essential to realise the full potential and widespread compliance with the Hong Kong Convention as we approach its entry into force in June 2025.

Marine data: Guiding a new narrative

Christopher Maro , (left) North American Data & Analytics Leader, Marine, Cargo & Logistics, Marsh and Duncan Cox , North American Marine Claims Leader, Marine, Cargo & Logistics, Marsh, explain the ever more critical role played by data across the maritime and logistics industry

Marine, cargo and logistics organisations rely on data to accurately predict, evaluate and manage risk and to price its transfer. As global shipping routes become pressure points for cascading risk, harnessing and analysing data is becoming increasingly crucial for organisations and insurers to reduce risk and improve the claims process.

The maritime industry is experiencing increasingly large and complex claims activity in areas such as fires and explosions, supply chain disruptions and extreme weather events.

While the impacts of a disruption are often varied, the insurance considerations are important as firms try to recover for associated losses.

Claims could include physical damage (to a vessel), loss of revenue (on the part of ports), the cost of salvage operations and business interruption (for owners and charterers of the vessel), loss of perishables and cargo delays, as well as any damage to the route.

Harnessing, aggregating and analysing advanced data in areas including cargo tracking, automatic identification system (AIS) transmissions, internet of things (IoT) sensors and weather patterns is critical in managing shipowners’ total cost of risk and reducing the likelihood of future claims.

For instance, artificial intelligence (AI) systems can crunch billions of data from all sources to make predictions for shipping routes, including tide behaviour, environmental conditions and wind speed.

Data collected has value outside of optimising shipping routes. It can also be used to prevent or quantify potential

loss, or even to aim to eliminate the cause of a loss.

MODERN APPROACH

Data enables a story to be told. Understanding conditions at any given time and location can help companies across the global supply chain, as well as insurers, to improve the accuracy of reporting for claims investigations and thus make better financial decisions and mitigate risk.

In any marine loss, investigators will attempt to gather the pertinent facts as quickly as possible. It is sometimes difficult to establish the cause of loss, given that multiple parties and contributing factors may be involved, often leading to causation disputes.

For example, in times and areas of geopolitical conflicts, there may be questions about whether a loss was caused by a peril of war and subject to relevant insurance exclusions.

In many cases, data can help to prevent losses, assist with establishing the facts and assist in seeking to eliminate the cause of loss in the following ways:

• Preventing loss: data can be used to improve cargo tracking capabilities and ensure product reaches its destination. With cargo movement visibility, vessel owners can help identify why a shipment may be delayed (for instance, theft), while monitoring conditions can help ensure that temperaturecontrolled goods are shipped with the appropriate packaging and labelling.

Data can also provide vessels with safer navigation routes. For instance, understanding of a waterway’s depth can be the difference between uneventful navigation and groundings or strandings and related perils, including ship damage, crew endangerment, cargo loss and marine pollution.

• Collecting facts: data collected from a voyage data recorder (VDR) can assist with establishing the cause of a loss event. Collecting data points on a vessel’s speed, GPS, hull stresses, depth, engine status and more, can provide evidence to

“Harnessing, aggregating and analysing advanced data in areas including cargo tracking, automatic identification system (AIS) transmissions, Internet of Things (IoT) sensors and weather patterns is critical in managing shipowners’ total cost of risk and reducing the likelihood of future claims.”

help determine the cause of a loss, such as a fire, collision, or grounding.

• Eliminating the cause of loss: AI systems can accelerate the ability to analyse data and enhance root cause analysis. The influential factors of total-loss marine accidents are complex and varied, although it’s important to remember that more than half of casualty situations can be attributed to human error. As such, there are benefits if data is used to provide value for crews and help them avoid situations that could cause losses.

Analysing data to tell the story of incidents can provide context and comparisons that can inform decision-making.

For example, stakeholders can use data to better model and understand how their experience compares to others. These insights can help to assess the level of risk transfer, the relationship between retention level and current rate online, loss histories and other matters.

The answers to such questions can provide a contextualized view of data and help to support business development, risk transfer, cost certainty and portfolio management.

EMPOWERING ORGANISATIONS

Vast data sets and generative AI tools have the potential to unlock ever-greater value for marine organisations. Insights can contextualise and prioritise causes of loss and analyse key

“By using data strategically, organisations across the industry can unlock new perspective, expertise and guidance to better understand today’s world of increasing risk and complexity within claims management — and find the opportunity in it.”

trends, costs, retention factors (inclusive of absorption modelling), as well as length of time to settlement, allowing for continued discussion and engagement.

All of these capabilities will become increasingly relevant as technology and claims handling becomes more sophisticated.

Data can also provide opportunities to develop insurance products that more efficiently meet the needs of the maritime industry. Aggregating data can produce clearer insights for organisations and insurers alike, and ultimately enable safer navigation and reduce risk of loss.

Marsh understands the importance of efficient and reliable marine and cargo insurance, claims management and analytics. We offer several digital tools to help organisations with placement, claims data and analytics.

When is a seaman not a seaman?

Pamela Milgrim , Vice President, Skuld, reviews the implications of the recent US Appeals Court narrowing of the definition of Jones Act seamen

In March 2024, the US Court of Appeals for the Fifth Circuit issued an opinion in Santee v Oceaneering International, Inc. et al., holding that a technician for remote operated vehicles (ROVs) on a drill ship was not a seaman covered by the Jones Act and that his exclusive remedy for an alleged injury was under the Longshore and Harbor Worker’s Compensation Act (LHWCA).

This ruling is significant because it reinforces the Fifth Circuit’s limited definition of a seaman following its 2021 ruling in Sanchez v Smart Fabricators of Texas, LLC.

Santee is an important decision for maritime employers and insurers as it helps to clarify those maritime workers which are seaman covered under the Jones Act and those which are covered under other more limited compensation regimes such as the LHWCA.

Santee worked for more than two decades as an ROV technician primarily as an employee of Oceaneering, a shore based ROV service company retained by oil and gas operators for offshore drilling.

NOT PERMANENTLY ASSIGNED

After 2016, Santee worked mostly aboard one Transocean drillship but was not permanently assigned to that vessel or the fleet to which it belonged and was periodically assigned to other vessels to perform ROV services under different contracts for different customers.

That drillship was chartered to Chevron, which also had a contract with Oceaneering for underwater exploration and drilling services. Santee claimed a January 2021 injury while working on board the drillship and performing routine

maintenance on the ROV launch and recovery system, which Oceaneering owned and operated.

Santee filed suit in Texas state court against defendants Oceaneering, Transocean and Chevron under the Jones Act, general maritime law and the Savings to Suitors Clause.

Defendants claimed that Santee was not a Jones Act seaman and removed the case to the US District Court for the Southern District of Texas asserting that federal question jurisdiction, general admiralty jurisdiction and original jurisdiction under the Outer Continental Shelf Lands Act (OCSLA) governed Santee’s claims.

Santee sought remand to state court, arguing that his claims were not removable because he was a Jones Act seaman. The district court denied the motion to remand and held that Santee’s Jones Act claim had been fraudulently pled. It further held that it had original jurisdiction under OCSLA because the drillship was attached to the seabed at the time Santee was injured.

TWO-PRONGED TEST

At the close of discovery, defendants moved for summary judgment on the basis that Santee was not a Jones Act seaman.

The district court noted the US Supreme Court’s twopronged test to determine if a plaintiff is considered a seaman under the Jones Act: (1) the plaintiff’s duties must contribute to the function or mission of the vessel; and (2) the plaintiff must have a connection to the vessel or fleet of vessels that is substantial in duration and in nature.

The factors a court must weigh when determining the nature of a potential seaman’s connection to a vessel were

““Santee is an important decision for maritime employers and insurers as it helps to clarify those maritime workers which are seaman covered under the Jones Act and those which are covered under other more limited compensation regimes such as the LHWCA.”

enumerated by the Fifth Circuit en banc panel in Sanchez and include: (1) whether the worker owes his or her allegiance to the vessel, rather than simply to a shoreside employer; (2) whether the work is sea-based or involves seagoing activity; and (3) whether the worker’s assignment to a vessel is limited to performance of a discrete task after which the worker’s connection to the vessel ends, or if the worker’s assignment includes sailing with the vessel.

In opposition to defendants’ summary judgment motions, Santee argued that he was an entrenched crewmember and that the duration of his service on the drillship established allegiance to that vessel.

The district court found these arguments to be unpersuasive and held that two of the three Sanchez factors weighed against Jones Act status.

In so ruling, it held Santee maintained allegiance to his land-based employer and not to the vessel on which he was on temporary assignment, and he was a transitory worker with a discrete task aboard the vessel who was free to take other jobs between vessel hitches.

APPEAL AFFIRMED

On appeal, the Fifth Circuit affirmed the district court’s ruling and rejected Santee’s claim of seaman status. The appellate court noted that Santee worked on various vessels which did not have a common function or mission, those vessels were owned by different entities and his assignments were sporadic and unpredictable.

The Fifth Circuit affirmed the three separate summary judgments granted by the district court in favour of defendants Oceaneering, Transocean, and Chevron. More specifically, it held that granting summary judgment to Oceaneering was appropriate because Santee was not a Jones Act seaman but covered under the LHWCA.

Due to the LHWCA’s exclusive remedy provision, Oceaneering, as Santee’s employer, was immune from tort liability.

Additionally, granting Transocean’s summary judgment motion was appropriate because it did not breach any of its limited vessel owner duties owed to LHWCA workers aboard their vessels.

In fact, Santee had the final authority over ROV repairs and any hazards would have been open and obvious to him, the ROV area and equipment were exclusively controlled by Oceaneering’s staff, and there was no evidence that Transocean had actual knowledge of the alleged condition requiring any intervention on its behalf.

Finally, the Fifth Circuit affirmed the trial court’s decision to grant Chevron’s motion for summary judgment because Chevron merely chartered the vessel, it lacked operational control, did not furnish the crew or maintain the vessel and did not set workplace safety rules or policies.

“After 2016, Santee worked mostly aboard one Transocean drillship but was not permanently assigned to that vessel or the fleet to which it belonged and was periodically assigned to other vessels to perform ROV services under different contracts for different customers.”

PENDING REVIEW

Following the ruling by a three-judge panel of the Fifth Circuit, Santee’s counsel filed a petition for en banc review by the entire Fifth Circuit. The Fifth Circuit treated the petition for rehearing en banc as a petition for panel rehearing and decided to withdraw the Fifth Circuit opinion issued in March. It is expected the same three-judge panel of the Fifth Circuit will review the case again and render its decision

This case illustrates the contractual and operational complexities that commonly exist between maritime entities that own, operate and charter vessels and the duties owed to workers under the Jones Act and the LHWCA.

Shipowners, operators and maritime employers should take note of the narrowing definition of Jones Act seaman and take steps to timely notify all potentially relevant insurers of any claims brought by maritime workers.

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Excuses,versus winning focus on digital adoption

Noria’s Ronny Reppe discusses the critical matter of overcoming psychological barriers to digital adoption in the marine and energy insurance market

Insurance technology solution providers have heard every excuse in the book from marine and energy insurers that continue to resist digitisation. Often, it’s budget related, they don’t have the right people to drive the change, or they simply don’t want to risk a major shift in their ways of working.

But there are three common psychological barriers hindering digital adoption that I’d like to address here: the “face-to-face business” excuse, the “we’ve always done it this way” excuse and “we don’t see the need” excuse.

We know that marine and energy insurance is falling behind, particularly in terms of harnessing data. A 2023 report found that despite 78% of industry professionals agreeing that technological innovation is a positive thing for the maritime industry, 45% admit to have a “volatile attitude” towards technology and 36% say they are actively resistant to change.

STUBBORN RESISTANCE

Despite this stubbornly high level of resistance, it is important to understand that change will happen in

marine and energy.

For inspiration, look at the exciting advancements in B2B payments that have transformed the way businesses transact and manage their financial operations.

Digital payment platforms designed specifically for B2B transactions provide streamlined and secure solutions to make and receive payments electronically.

Mobile payments have also made significant strides, and the adoption of application programming interfaces (APIs) has revolutionised B2B payments.

Today, seamless integration between different systems and platforms by facilitating real-time data exchange and communication is common, allowing businesses to automate payment processes, synchronise financial data and improve overall transaction efficiency.

International supply chains, for example, have benefited from the game-changing efficiency gains enabled by purchase-to-pay automation platforms such as Tradeshift.

Insurance will follow, with benefits including slashing the number of times data is re-entered into systems, removing

the burden of finding errors and inconsistencies in data sets, getting an up-to-date overview of portfolio performance with ease, and always receiving the premium before being at risk. The case for improvement is clear, but we have some significant psychological barriers to adoption to overcome before we can enjoy benefits such as these.

Here are three common excuses I have heard many times in conversation with marine and energy |insurance decision-makers.

THE “FACE-TO-FACE” EXCUSE

“We’re a face-to-face business, not dependant on technology for interacting with clients…”

The first common barrier to digital adoption in marine and energy insurance is the belief that their business model relies heavily on face-to-face interactions. This, to put it bluntly, is an excuse for inaction.

While personal relationships are undoubtedly crucial in these sectors, it is essential to recognise that digital tools can complement and enhance these relationships rather than replace them entirely.

“Conduct thorough research to identify specific pain points within the organisation that could be addressed through digital tools. Resistance to digital adoption can be overcome by promoting a growth mindset and emphasising the potential for positive change”

Ronny Reppe, Noria

To overcome the “face-to-face” excuse, companies should focus on showcasing the value of digital solutions in facilitating communication, improving accessibility and reducing geographical barriers.

Emphasise the convenience of virtual meetings, collaborative platforms and real-time data sharing which can ultimately strengthen customer relationships and improve operational efficiency.

You can have both. Keep conducting the important face-toface discussions for negotiations and other interactions.

But, you could be leveraging technology and efficient processes to enable improved face-to-face meetings and better data to enhance decision-making, without the need for people to punch data manually afterwards.

My message is to keep the face-to-face aspect, but don’t use it as a barrier to efficiency. The key is to understand that more efficient handling of data in marine and energy insurance will create more time to add value through face-to-face interaction.

THE “WE’VE ALWAYS DONE IT THIS WAY” EXCUSE

Another significant psychological barrier is the resistance to change, often rooted in the notion of “we’ve always done it this way.”

This mindset can stifle innovation and hinder digital transformation efforts. To address this obstacle, organisations must foster a culture of openness, curiosity and continuous improvement.

Encourage stakeholders to question existing processes and challenge the status quo. Highlight success stories of insurers that embraced digital solutions and reaped the benefits, such as the Australian insurer IAG that saves 150,000 hours per year by deploying nearly 150 “bots” (a combination of software

automation and AI). This is the equivalent of 85 staff per year and the company plans to expand the program to eliminate 500,000 hours a year by 2026.

Conduct thorough research to identify specific pain points within the organisation that could be addressed through digital tools. Resistance to digital adoption can be overcome by promoting a growth mindset and emphasising the potential for positive change.

THE “I DON’T NEED TO ALWAYS CHASE THE LATEST TECH” EXCUSE

Some companies – or specific individuals at companies – may resist digital adoption by claiming that constantly pursuing the latest technology is unnecessary.

While it is true that blindly chasing every new trend is not advisable, it is essential to recognise that technology evolves rapidly and can offer significant advantages when strategically implemented.

To counter the “latest tech” excuse, educate stakeholders about the tangible benefits of specific digital solutions that align with their unique business needs.

Highlight case studies where digital adoption led to improved efficiency, reduced costs, enhanced risk assessment and increased customer satisfaction.

Emphasise the importance of staying informed about emerging technologies and conducting thorough cost-benefit analyses before making investment decisions.

WINNING FOCUS

Most change leaders advise us to focus on what we want to achieve, instead of what we don’t want to happen.

A winning focus starts with the question: “How can we benefit from this development?” This will give your organization a positive and constructive focus to build a winning culture rather than risk falling behind and losing ground.

Having said this, there will always be situations where one of the abovementioned excuses are legitimate. There are always exceptions to the rule – but insurers should not make excuses to the rule.

If you’re not the first mover in your industry, it becomes even more important to be adaptable, both as an organisation and in terms of technology.

Being ready for change and adapting quickly allows you to stay competitive and seize opportunities as they arise. Remember that if you don’t start handling your insurance data properly today, you will inevitably become tomorrow’s loser.

Believing that everything will stay the same is a dangerous assumption.

Markets evolve, customer preferences shift, and disruptive technologies emerge. Organisations that have a strong belief in the status quo may find themselves left behind. It’s essential to always be on the lookout for the next change and be prepared to manoeuvre in a changing market.

“Being ready for change and adapting quickly allows you to stay competitive and seize opportunities as they arise. Remember that if you don’t start handling your insurance data properly today, you will inevitably become tomorrow’s loser.”

Ronny Reppe, Noria

Curiosity and a willingness to explore new tools and approaches are key to continuous improvement. Always be curious about new ways of doing things, stay informed about emerging technologies and actively seek opportunities to improve processes and operations.

Training on adaptability should be a regular part of your organisational development. Set aside time each week to train and develop strategies for adaptability. This deliberate focus will help your organisation develop the necessary skills and mindset to embrace change proactively.

By always being on the lookout for the next improvement, you will be better prepared to navigate disruptions and take the next step when something urgent, like a new technology disruption, occurs.

Winning focus on digital adoption in marine and energy insurance requires a proactive approach. f you aspire to be a champion of change, start by highlighting the benefits of digital solutions and showcasing success stories.

By providing the necessary levers to catalyse a mindset shift, organisations can navigate the path towards digital adoption and stay relevant in a fast-changing environment.

Nordics

16 October 2024

16th October 2024, Oslo

The Nordic marine sector has been a long-term success story, with insurers and clubs developing a global reach. We had felt for some time that as our portfolio developed, the Nordics were an important region that required its own event and as such, Marine Insurance Nordics was born.

The inaugural Marine Insurance Nordics event was held virtually in 2021 and was a resounding success. With a record number of attendees in 2023 , this event is specifically designed to bring together all the key players in the Nordic marine insurance market. The agenda it will feature a range of senior speakers discussing, debating and offering actionable insights into the issues affecting the region in 2024 and beyond.

GLOBAL PARTNERS

Data-driven resilience

Ben Hubbard

,

CEO of Parsyl, argues that data can empower insurers and help them navigate climate change challenges in

supply chains

Climate change presents a significant challenge to the supply chains we rely on, reshaping the dynamics of marine cargo insurance.

The ramifications of rising sea levels, warmer temperatures and severe weather events requires cargo insurers to leverage supply chain data to help themselves, brokers and clients mitigate risks, build greater resiliency and make a positive impact on climate change.

So where are we today in this critical area?

First, there are major disruptions to vital waterways. Droughts, heatwaves and escalating global temperatures present a distinct risk to the operation of critical infrastructure.

As evidenced by past crises in the Panama Canal and Suez Canal, rising temperatures and dwindling water levels in vital waterways can disrupt global trade and transportation networks with far-reaching economic implications.

Second, we are seeing longer routes being used due to re-routing.

Shipping routes are extending, caused by disruptions to maritime passages, shifts in trade patterns, higher sea levels and changing coastal topography. These longer journeys result in heightened fuel consumption, increased shipping costs and an increased likelihood of operational challenges, leading to product waste and supply chain inefficiencies.

Boston Consulting Group estimates that ships avoiding conflict in the Red Sea have emitted 13.6 million extra tons of CO2 emissions in the past four months, making it difficult for companies to hit net zero targets and de-carbonise

their supply chains.

Third, we are seeing widening gaps in infrastructure. Climate change exacerbates existing infrastructure gaps within the maritime and logistics industry causing delays and port closures, increased costs and maintenance, reduced cargo-handling capacity and less competitiveness within the sector.

These disruptions reverberate throughout supply chains and regional economies, underscoring the need for proactive measures to build resilient infrastructure in the face of climate change.

““Claims

management becomes increasingly critical as the frequency and severity of climate-related events are expected to drive a surge in claims. Leveraging data and analytics, insurers can efficiently determine liability, understand what transpired and when, and get payment to clients quickly.”

EVOLUTION NEEDED

Insurers must evolve to minimize impacts of climate change.

Leveraging supply chain data becomes even more critical for insurers in navigating the uncertainties posed by climate change.

As a supply chain insurer, Parsyl integrates diverse data sources—spanning real-time insights and historical trends—to identify patterns, assess losses and develop predictive risk models tailored to the specific commodity’s unique challenges.

RISK ASSESSMENT

Climate change disrupts traditional risk assessment models for cargo insurers, making predictive modeling a vital tool for improving risk assessment practices by analysing factors influenced by climate change.

Parsyl distinguishes itself by employing data from multiple channels to comprehensively evaluate each client’s risk profile, incorporating a variety of considerations into its predictive modeling frameworks to provide proactive and resilient marine cargo insurance solutions.

Parsyl’s delay coverage model leverages predictive

modelling to challenge traditional risk assessment. While many insurers have flagged delay coverage as “too risky” to offer clients, this typically is due to a lack of adequate visibility into the risk. Paryl’s model reveals the nature of particular routes and supply chain conditions and provides its underwriters with the transparency to price appropriately.

ADAPT AND MITIGATE

Countries with greater infrastructure investment are likely to be better positioned to adapt and mitigate the impacts of climate change on their economies and communities.

Insurers must consider this regional variation in their underwriting processes, incentivise customers that make a positive impact on climate change and actively mitigate the specific climate-related risks prevalent in their respective regions.

By integrating data from diverse sources, insurers can gain comprehensive risk insights into commodity-specific vulnerabilities, shipping routes, packaging methods, vendor practices and climate-related events.

Parsyl seamlessly integrates data from multiple sources, including IoT and monitoring data, to better understand risk and reward clients who expand their use of monitoring products.

For example, monitoring data collected by one of Parsyl’s customers showed the temperature stability of their fresh shipments performed notably better than the industry average, with 66% less shelf life lost in transit, allowing Parsyl to offer the customer a discounted rate at renewal.

This holistic approach enables Parsyl’s underwriters to more accurately assess a risk, manage exposure and price transparently, as the underwriting process is informed by data rather than subjective assessments alone.

By blending human expertise with data-driven insights and technology, Parsyl minimises biases and provides clients with more transparent quotes.

This approach empowers clients to understand the factors that influence their premiums, enabling them to make informed decisions and implement risk mitigation measures to reduce costs and make positive impacts on climate change.

CLAIMS MANAGEMENT

Claims management becomes increasingly critical as the frequency and severity of climate-related events are expected to drive a surge in claims. Leveraging data and analytics, insurers can efficiently determine liability, understand what transpired and when, while also getting payment to clients quickly.

Parsyl saw this in action when its customer was notified that the Ever Forward vessel was stuck in the Chesapeake Bay with its container of crab meat.

Because of Parsyl’s use of IoT monitoring data, when the container was finally offloaded, it showed that the crab meat stayed in spec for the duration of the extended trip. The

“Boston Consulting Group estimates that ships avoiding conflict in the Red Sea have emitted 13.6 million extra tons of CO 2 emissions over the past four months, making it difficult for companies to hit net zero targets and de-carbonise their supply chains.’’

client avoided wasting product and a $340,000 claim. Parsyl rewarded the client for good risk management practices with a 10% discount on their premium.

Predictive modeling is also emerging as a powerful tool in claims management, which could enable insurers to predict claims before they happen and potentially allow clients to intervene to mitigate loss.

It also empowers insurers to anticipate the likelihood and financial implications of future claims, enabling them to allocate resources effectively and manage risk proactively. This collaborative approach fosters a partnership between insurers and clients, united in their efforts to mitigate future risks.

Marine cargo insurers must evolve to build future resilience, transitioning from service providers to strategic partners for both clients and their brokers.

By seamlessly integrating data already collected and engrained in many customers’ standard operating procedures, Parsyl makes it easy for customers and brokers to understand their coverage and premium.

This approach provides a holistic understanding of the risk and allows Parsyl to create differentiated policies without burdening clients or brokers, letting them focus on their core operations.

For example, through Parsyl’s partnership with Lineage Logistics, Parsyl clients who store with Lineage can see anywhere from a 10% -40% discount on their Parsyl insurance premiums as the data provides a view into risk that may be overlooked by other insurers.

By using various sources of data and new technologies, insurers such as Parsyl can offer more precise pricing, develop tailored risk management strategies and handle claims more effectively to mitigate the impacts of climate-related risks on customers’ operations and incentivise those who make a positive impact on climate change.

A problem shared is a problem halved

Helen Barden , senior solicitorexternal affairs, NorthStandard, disucsses the rising importance of data in the maritime energy transition

We all know how valuable data can be. We’re very used to being asked about cookie preferences when we visit websites. But what role will data play in the maritime energy transition?

The International Maritime Organisation’s (IMO) greenhouse gas (GHG) strategy is to reach net-zero GHG emissions from international shipping by or around 2050 and there are various check points to meet along the way.

Complete and accurate data will be needed to know whether the targets are met. As the saying goes, “you can’t manage what you can’t measure”.

But how can data be used to drive decarbonisation and make sure we meet (or beat!) the IMO’s GHG Strategy?

Regulation is a key driver when it comes to decarbonising the shipping industry and data is integral to regulation.

CARBON INTENSITY

The Carbon Intensity Indicator (CII) regulations were developed under the framework of the initial IMO GHG strategy.

This regulation is heavily reliant on data, not only to ensure that the attained annual operational CII can be correctly calculated, verified and recorded, but also so that shipowners (and charterers) can monitor how the vessel is performing and whether the ship’s operation needs to be adjusted to meet the required annual operational CII.

The IMO’s document collection system (DCS) is used for the collection of data and to calculate the ship’s operational CII.

The IMO’s interest in more complete data is also increasing. At MEPC 81, in spring 2024, amendments to Appendix IX of MARPOL Annex VI were agreed. They will enter into force in August 2025, requiring additional data to be submitted through the IMO DCS.

Of course, you cannot usually talk about the CII regulations without mentioning the problems associated with them. However, if we put aside the problems and apparent

unfairness and inefficiencies associated with the CII regulations, which have perhaps watered down the impact that they could have had, there is a real positive that has (certainly in part) come out of these regulations: Conversations between owners and charterers about data.

It would be fair to say that there is a nervousness from stakeholders when it comes to data transparency and sharing of data. However, the regulations have increased the need for owners and charterers to be on the same page when it comes to the ship’s operational efficiency.

The regulations have prompted more dialogue between owners and charterers about data accuracy and transparency, as well as the sharing of data.

Squeezing all we can out of a ship’s operational efficiency is imperative to gain maximum emission savings given that we are still a long way from the world’s fleet running on zero or near zero GHG emission fuels. And once we do get there, operational efficiency will remain vital because of the higher price of these alternative fuels.

EXPANDING CHARTER

Industry initiatives such as the Sea Cargo Charter are also encouraging the dialogue between owners and charterers when it comes to the transparency and sharing of data.

To further progress this, in April 2024, the Sea Cargo Charter initiative was expanded to allow charterers and shipowners to monitor and report their emissions under a common framework.

Another driver in the energy transition, which may or may not be linked with a regulatory driver, is cost.

Calculating the cost requires data. If we take the European Union’s Emission Trading System as an example, emissions are now directly attributable to a cost, which is significant.

Because these costs are, in general, being passed down the charterparty chain and then on to the end user, charterers have even more of an interest than just reducing the cost of the fuel. It is now coupled with an eye to reducing EU allowance cost exposure.

In this scenario there is also even more of an incentive to ensure that the data is accurate, because mistakes with the data could lead to a cost consequence. This is another reason to get your data house in order.

Furthermore, with the expected introduction in 2027 of the IMO’s market-based measures – one an economic measure and one a technical fuel standard – the focus on cost will only keep on growing and, therefore, so too will the focus on data validity, transparency and verification.

Of course, not all costs can be immediately absorbed or passed on as part of the trade when it comes to decarbonisation.

COST SHARING

The cost of energy efficiency technologies (EET), or alternative energy sources such as wind propulsion, may be

|prohibitive to an owner unless there is cost sharing or financing available.

To understand the savings any given EET or wind technology may provide will require complete and accurate data and analysis. Methodologies for calculating the energy efficiency of EETs or wind technology is not always transparent and indeed not always consistent.

In due course it will be helpful to have greater consistency in terms of these methodologies so we can compare apples with apples.

Owners and charterers in longer-term relationships may look to share the cost of EETs, but again, to do so the benefit needs to be understood which requires clarity on the savings. This again takes us back to the importance of data and then the methodology by which the data is used to calculate the benefit.

FINANCE FRAMEWORK

The Poseidon Principles were introduced to provide a framework for ship finance under which climate considerations are integrated into the process to promote decarbonisation of the shipping industry.

The Poseidon Principles have also been extended to hull underwriters. However, the success of the Poseidon Principles will depend on high quality data and analysis.

And, for future fuels and technologies, obtaining data, for example from pilot projects, will allow for more informed discussion and fact-based decisions.

So, while data is key to the maritime energy transition, scrutiny of data sources will inevitably increase, as will the need for data accuracy and transparency. Verification or |certification of data will continue to be imperative, as will clarity of the framework (whether regulatory, commercial or

“There will always be commercial considerations that will stop data being shared, however, there is a risk we miss important pieces of the decarbonisation jigsaw because one stakeholder is holding on to information .”

Helen Bardon, NorthStandard

voluntary) within which the data is being used.

Finally, while data is being generated, analysed and put into use by those seeking to drive decarbonisation, collaboration and shared learning amongst stakeholders will be vital if we are to make the most of the data we do have to drive the energy transition.

There will always be commercial considerations that will stop data being shared, however, there is a risk we miss important pieces of the decarbonisation jigsaw because one stakeholder is holding on to information that would be useful for another. Much of this can be avoided by open conversations within the industry so there is a better understanding of work underway.

There is a lot of good work being done by many in the shipping industry to reach net zero, but a joining up of this data and knowledge will be vital if we are to use it in the timeliest way and for maximum impact.

Keeping the lights on

Stephen Rowbotham, Principal Associate, Hawkins highlights the importance of fuel systems in marine operations

When combining diesel combustion engines with aeroderivative gas turbines in power generation assets and mechanical drive systems, the fuel specification and adherence to the specification are critical. Compliance ensures the optimal operation and longevity of

the asset and minimises down time.

In marine installations, large vessels can have a mix of propulsion drive systems. Typically, these consist solely of large diesel units, however, in some large vessels, the addition of gas turbines can be found - for that extra bit of thrust/speed.

Both can be susceptible to damage and loss of power if problems exist within the fuel supply system. Problems can be caused by using the wrong fuel, or if contaminants are present in the fuel system.

If contamination occurs, this can lead to a sudden loss of power which can affect the safety of the vessel. Contamination can compromise the integrity of not only the engine, but also the fuel system, which will require draining and cleaning, both of which will be costly and time consuming to execute.

A typical propulsion system schematic is shown in Figure 1. This shows two diesel units and one gas turbine in a two-propeller propulsion system.

If fuel problems arise, both power unit types can be affected. In the example below, I look at how fuel contamination can lead to a buildup of deposits in the fuel system, especially in the final fuel delivery section, which in a gas turbine is the fuel nozzles.

The fuel nozzles are complex components that premixes fuel with compressed air and inject the fuel mixture into the combustion can. Combustors see the hottest temperatures.

A schematic diagram of a typical fuel nozzle in a single

annular combustor (SAC) is shown in Figure 2. The fuel nozzle is the final link prior to the fuel being atomised into the compressed air flow and ignited.

Issues in the fuel system can be detected by the gas turbine monitoring systems which include temperature and pressure sensors.

In SAC gas turbines, there are around 30 fuel nozzles. If issues are developing, the temperature spread around the combustor is likely to change and exceed the permitted temperature spread which is typically limited to approximately 100°c to 150°c across eight thermocouples dispersed around the turbine.

The fuel pressures in the delivery pipework will also increase as blockages develop. These are both indicators of problems in the fuel supply system, and monitoring of the system’s sensors is of critical importance.

In the case study that follows, excessive temperature spreads and reduced power output were detected in a 72-hour period, indicating an issue with the combustion that required further investigation. This shows how rapid the degradation can be once coking occurs.

Once an issue has been identified, there are limited options for a vessel at sea. The first is to inspect the fuel nozzles to see if there are any visible signs of distress. If deposits are found as in the example below, then all the fuel nozzles will likely need to be replaced. On a gas turbine, each fuel nozzle can cost in excess of US$5000 and a vessel will not carry a spare set on board.

To determine the source of deposits, a laboratory examination of the affected nozzles will be required. A typical suite of tests includes:

• Visual examination;

• Sampling deposits;

• Optical microscope examination; and

• Scanning electron microscope (SEM) and energy dispersive xray spectroscopy (EDS).

REMNANTS OF FUEL

Visual examination of the nozzles from the gas turbine that had exhibited excessive T-48 temperature spreads (Figure 3), revealed remnants of liquid fuel, with both the primary and the secondary fuel line blocked by deposits.

The primary flow line had been cleared prior to receipt into the laboratory but was reported to be blocked on removal from the gas turbine.

Within the residual fuel, solid deposits were found that were collected and examined. The solid deposits revealed a layered structure (Figure 4) consistent with deposits forming over several operating cycles (stops).

This appearance is consistent with coking of the fuel during shut down and thermal soak back. Soak back is the cooling off period after shutdown and can be challenging as it can lead to very high temperatures in the engine which

Figure 1. Schematic diagram of power train on a marine vessel with two diesel and one gas turbine set up.

Figure 2. Schematic diagram of a single annular combustor (SAC)

Fuel nozzle

seawater into the fuel system at some stage.

Besides the issues generated by the coking on the fuel combustion, the gas turbine had been exposed to elevated levels of sodium, which had passed through the highpressure turbine section. At the temperatures in the hot section of the turbine (high-pressure turbine) this can lead to Type 2 hot corrosion of the turbine blades (which are more expensive than the fuel nozzles). This can lead to a catastrophic failure of the unit if not rectified.

Normally, sodium levels in fuels are specified/restricted to levels down to parts per billion to avoid this degradation mechanism.

can damage the equipment.

The appearance would also indicate that a purge cycle was not undertaken to remove residual fuel from the fuel line in the area.

The samples collected were analysed using an EDS analyser attached to an SEM. This revealed the deposits to be predominately carbon, however significant traces of sodium (Na) and chlorine (Cl) were detected in areas exhibiting a cubic crystal form (Figure 5). The cubic crystals were observed in all samples examined.

The coking found in the fuel nozzles would indicate that issues were present in the purge sequence of the fuel lines on shut down.

In most industrial gas turbine applications, on shut down, the fuel manifold is purged with compressed air to clear the line of residual fuel to minimise the possibility of coking.

This did not appear to have occurred. The presence of cubic crystals of sodium chloride indicated contamination of the fuel by ingress of sodium chloride rich solute, such as

recovered from

Secondary electron image. The deposit replicated the machined surface profile of the nozzle.

On the completion of the analysis, it was clear that further investigation was required, into the operating procedures and fuel monitoring during the operation of the vessel.

of deposits and EDS spectrum showing elemental composition of white cubic deposits.

Figure 3. Incident nozzle showing the remnants of liquid fuel

Figure 4. Layered deposit

the fuel nozzle.

Figure 5. Secondary electron images

Water, water everywhere

Lower freshwater levels in key river systems and canals are already having worldwide effects. Frank Gonynor , Senior Claims Executive, Gard, asks whether the shipping industry will have to rethink the global movement of goods

For centuries, natural rivers and man-made waterways have extended maritime shipping into inland areas, benefiting global trade. Carriage, mostly the way by ship, has meant that both transcontinental and intercontinental logistics are simpler and cheaper.

Because of climate change, we are witnessing dramatic changes in water levels in river systems and canals that use freshwater for their operation, such as the Panama Canal. These directly impact access and use of these vital maritime trade pathways. The consequences are pressing, both in the short and longer term.

Persistent severe droughts have resulted in direct operational limitations of the Panama Canal, as the system uses large amounts of freshwater to operate.

Lower permitted numbers of transits are the current reality. The alteration of water movements to conserve that resource has allowed some saltwater ingress into what had, previously, been a fresh-water environment. This has led to unknown ecological consequences.

The restriction of canal usage has a direct effect on shipping frequency and costs and has resulted in alternatives, such as rail service across the isthmus of Panama. This brings with it delays and raising the carbon ‘footprint’ of such shipments – ironically exacerbating further global warming.

The Rio Parana system in South America is essential for the movement of crucial agricultural products such as soybeans and wheat. Low water levels for the last several years have impeded large vessel movements, causing more groundings and other navigational mishaps, adding greater risk.

“Because of climate change, we are witnessing dramatic changes in water levels in river systems and canals that use freshwater for their operation, such as the Panama Canal. These directly impact access and use of these vital maritime trade pathways, and the consequences are pressing, both in the short and longer term.”

SMALLER LOADS

Similar issues are now occurring in the Amazon River basin, another region from which foodstuffs and ores are vital to the world’s economy.

Recent drought-caused lower water levels that, in turn, means that ships passing through can now only carry dramatically smaller loads. The area does not have practical intermodal alternatives. Road trucking is possible, but, comes at a much higher cost and rail service is not a realistic substitute in this region.

In the Mississippi River, dramatic

swings between drought and flood rains, has been a harbinger of ongoing climactic warming. Such changes in river levels render shipping, both for inland and ocean-going vessels, difficult or even impossible, causing shipping disruptions and riskier port calls.

The issue is not limited to the Americas. In late 2022, severe drought resulted in a significant reduction in the traffic using the Yangtze River. The river reduced to approximately half its width and water levels near Wuhan fell to its lowest level since records began in 1865.

Similarly in 2022, low rainfall caused the water level of the Rhine in Germany to plummet south of Cologne and Duisburg, resulting in reduced traffic and surcharges on freight rates.

The effects of climate change and water levels on trade routes is a worldwide problem that requires both long-term solutions and interim measures.

The effects of short-loading, restricted vessel schedules, more frequent navigational casualties, re-prioritising water usages and inputs, and the shift to alternative modes of transport all demand attention now.

LOGISTICAL RETHINK

This will require parties at all levels in global trade to rethink how the movement of goods will be structured, particularly

in areas where freshwater levels are critical. Such changes could see many operational revisions that will all certainly be costly.

For example, one option is to enlarge the Panama Canal freshwater supplies by constructing additional reservoirs and further tailoring operations to conserve freshwater movements needed for its lock systems.

But even with such changes, the number of daily transits is likely to remain lower. The diversion of ships around the tip of South America, increasing radically the travel times and therefore raising the chances for cargo damage/loss and ship casualties, will probably continue.

The water needs of the canal also have to be balanced with the consumption of freshwater by the local Panamanian population, that has grown significantly, adding a further stress factor on the same water sources.

LONG-TERM CHALLENGE

What to do if low water levels become persistent? If this transpires, then certain inland ports may become lost to maritime trade, shifting traffic to ports with consistently deeper water levels. This would alter existing trading patterns and create the need for expansion of capacity at other ports.

Such changes would take time and, in the interim, there might be shortages of certain commodities and goods, driving prices and transport costs even higher.

A further consideration is the human cost.

Seafarers would be expected to assist in much more challenging voyages of longer duration and frequent changes in ports of call because of sudden water level changes.

This would add to the stress of their work and could make for higher potential for human errors causing accidents. This would also render the occupation of the seafarer less attractive and thus maritime shipping less sustainable.

While the world community grapples with climate change and the sea level changes that could pose severe threats to the future of coastal communities and nations, the volatility being seen in the global canal and river systems is emerging as a more pressing issue here and now. Most likely, it will necessitate large changes in how global marine trade is conducted.

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