Maritime transport, which represents more than 80% of the volume of global trade, is currently facing significant technological, political and climate challenges. The insurance sector is there to help it overcome them successfully.
Whole economies and societies depend on the global supply chain, and to ensure its smooth functioning, we have to deal with constant and ever-evolving risks, from technical breakdowns to natural disasters. Maritime insurance is a fundamental instrument in facilitating the secure and efficient exchange of goods globally. Michael Burle, head of Marine & Deputy Active Underwriter at Liberty Specialty Markets, addressed the subject during the last congress held by of Alsum, the Latin American Association of Marine Underwriters.
We already know that the magnitude of the dangers facing maritime insurance adds a lot of complexity to this challenge. The magnitude of the dangers that can’t be predicted, especially those of natural origin, also add an equal, if less visible, amount of complexity to the scenario. Burle talks about the “black jellyfish” concept: catastrophic events and phenomena that have the potential to become common: “We don’t give enough credit to the fact that free trade continues to exist and thrive even in the face of complicated challenges like pandemics, hurricanes and armed conflict,” he says.
Maritime insurance acts as a protective shield for both producers and exporters as well as logistics operators, and its role is significant. Although there are many dangers that threaten the operational efficiency of maritime insurance, Burle focused his presentation on two aspects with the greatest impact: climate change and geopolitical tensions.
Climate change: from threat to reality
According to NASA data, 2024 was the warmest year on Earth since modern temperature recordkeeping began (in the 19th century), and the last 10 years have been the warmest 10 years ever. “Global warming is a real thing, and it’s irreversible,” says Burle. Climate change is undoubtedly one of the most pressing challenges facing the maritime industry. Its immediate consequences already impact the sector in many ways. It generates changing weather patterns that alter the shipping routes and prevents the sector from transitioning to cleaner energy sources and decarbonizing. In addition, the incidence of climatic phenomena has lead to greater incidents of loss and damage to cargo.
As a recent example, the expert cited the drought that disrupted the dynamics of the Panama Canal in 2024. The drastic decrease in water levels meant that the number and size of the vessels passing through the canal had to be restricted. “The water level was six feet (almost two meters) below normal, and these restrictions led to delays in services, which in turn interrupted supply and increased costs for the companies involved, including shipowners and charterers, who either took longer routes or chose to wait,” he explained.
The Suez Canal, another strategic point in the Mediterranean Sea, collapsed for six days in 2021 when the Ever Given container ship ran aground after having been diverted from its original route due to strong winds. Daily global losses exceeded 15 million dollars.
Concern about geopolitical tensions
The latest Report on Maritime Transport, published in the last quarter of 2024 by the United Nations Conference on Trade and Development, indicates that geopolitical tensions and trade policy changes continue to define transport and maritime trade. “I’ve been in the insurance industry for 32 years, and I’ never seen such a divided and polarized world. Unfortunately, various types of walls and conflicts exist in every corner of the planet, and many of these impact on maritime trade, especially those centered around the Black Sea and the Red Sea,” said Burle.
Instability in these regions is a fact of life, and the expert is certain that the situation changes from one day to the next. The Houthi insurgency in Yemen, or the war between Russia and Ukraine, don’t just affect the countries directly involved – they also impact on the stability of world trade.
The insurance industry has played an essential role in reducing exposure to these risks and protecting companies operating in hazardous areas: “Today we continue to insure ships and vulnerable cargo in these areas, and the sector continues to fulfill its essential function,” he asserts.
In partnership with the insurance industry
If maritime insurance has managed to remain a guarantor of global trade, it’s because it has successfully evolved and adapted to changing needs in the face of current and potential challenges. However, Burle says there is still more work to be done: “We have a responsibility to continue training, to offer new coverage, to generate new market opportunities so that producers and exporters can companies to develop and so that the trade world as we know it keeps moving,” he says.
The supporting role of technology, and in particular artificial intelligence, has an increasing weight in the sector and also offers “great opportunities to improve maritime insurance management.” This collaboration between sectors will depend on the ability to detect emerging risks, as well as the resilience and adaptability of the market. “It’s worth remembering that the first insurance product invented in old Babylon was related to maritime insurance. We still have reasons to be proud of our industry,” Burle concluded.
