August 20 - UK based insurance broker and risk adviser Marsh says that improvements to vessel capabilities and support services are key to the future of Arctic navigation.
According to Marsh's report, Arctic Shipping: Navigating the Risks and Opportunities, Arctic shipping routes present the global maritime community with financially attractive alternatives on Europe to Asia trade routes through the Panama and Suez canals.
The routes are also increasingly relevant to the oil and gas sector, as energy exploration and production expands into the waters off the Russian Federation, northern Alaska, Canada and Greenland.
However, Marsh suggests that the rapid development of fledgling Arctic shipping routes is dependent upon improvements in the capabilities of vessels navigating them, and the upgrade and expansion of the support facilities in the region.
It added that shipping firms need to ensure they have a full understanding of the risks involved in order to gain the confidence of insurers.
"While marine insurers are largely supportive of the development of Arctic shipping routes, they are extremely wary about incurring large, high profile losses while the market is still in its infancy," said Marcus Baker, chairman of Marsh's global marine practice.
"Currently, the majority of ships and their crews lack adequate experience, are unprepared, and the support facilities are not yet in place for full-scale commercial voyages through the Northern Sea Route and the Northwest Passage. In the absence of hard facts, it is extremely difficult for marine insurers to price an insurable risk, or even to agree to cover a voyage in the first place."
According to Marsh's report, insurers and P&I clubs require more detailed information about vessel capabilities and available salvage services, with wreck removal, pollution risks and crew health and safety of major concern to underwriters.
Steve Harris, a senior vice president in Marsh's global marine practice said: "Risk presentation is critical. Only if shipping firms can present insurers with the information they require, and all parties concerned take a collaborative approach to calculating these risks, will insurance capacity be readily available to support the growth in Arctic navigation."