Inflation poses challenges for the marine insurance industry

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Global marine hull insurance premiums increased by 5.7% in 2022 due to higher activity, vessel values, and reduced market capacity, according to the International Union Transport insurance (IUMI). However, the marine insurance industry is expected to be significantly impacted by inflation in the future. Inflationary pressures have driven up the costs of materials, shipyards, and labor, but premium increases have not kept pace. This lack of adjustment could lead to a reduction in overall profitability in the coming years.

In addition to inflation, hull insurers need to pay attention to other key issues in the industry. The introduction and adoption of new fuels in the shipping industry, in line with greenhouse gas emissions targets and sustainability initiatives, are impacting marine insurance companies. The use of electric vehicles and lithium-ion batteries on container ships and car carriers raises concerns about the risk of fires and explosions. Proper safety measures, early fire detection, and clearly defined freight acceptance protocols are crucial in addressing these risks.

The “dark fleet” is another growing threat to insurers. This fleet consists of older vessels that operate without AIS transponders and lack proper maintenance, clarity of ownership, and insurance. The fleet poses a higher risk of oil spills and collisions and evades sanctions. The industry witnessed eight incidents involving sanctioned oil tankers in 2022, including a destructive explosion that could not be addressed due to the vessel being part of the “dark fleet.” The owners of these vessels cannot be contacted, causing difficulties for authorities.

Overall, the marine insurance industry is facing challenges due to inflation, the adoption of new fuels, and the presence of the “dark fleet.” Adjustments in premium rates and the implementation of safety measures are essential for insurers to navigate these challenges effectively.

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