Marine insurance weighs up risks in ESG drive (source: Lloyd’s List)

Marine insurance is having to evolve and adapt to a changing world that is becoming more focused on environmental, social and governance concerns

Marine insurance industry seeks collaboration with all stakeholders to better understand what’s at stake when it comes to new fuel technology

THE marine insurance industry is seeking collaboration with all stakeholders to better understand the risks involved with new fuel technology.

Speaking on a Shipping Risk Forum panel during London International Shipping week, leading names were in agreement that working together to support clients’ climate goals was necessary.

The primary goal is to continue to provide cover for shipowners to trade/operate their ships, according to Standard Club’s UK managing director James Bean.

“We will be standing shoulder-to-shoulder with our clients and will be there to support their needs and will be working with them as they adopt new technology,” he said, adding that the insurance industry cannot tell owners which fuel to use.

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Hull and machinery will take a “more holistic” view in that if one makes a ship type uninsurable, that will lead to major incidents.

“It is inevitable there will be incidents but we will adapt. Not supporting members will be detrimental. We are part of the shipping industry and we will deal with claims.”

To that end, Standard is establishing a future fuels working group to identify how fuels are used and the potential gaps. It is seen as a bespoke research and development exercise with owners and different partnerships, but it is uncertain how it will pan out.

An active dialogue was needed now to build confidence in ESG matters, according to Gard’s managing director and chief underwriting officer Magne Nilsen.

At an industry event last week, the Poseidon Principles for insurance was mooted and Gard was one of the drafting members.

“We need to act now and partner with engine developers, rather than paying off claims [later],” said Sundeep Khera, global head of hull and marine UK and Lloyd’s market at AXA XL, who advocated for consensus in the industry.

“Every insurer has a red line and it is very important for us to get together to see how much we can stretch them,” he said, adding that class societies had a role to play in this.

In terms of new fuels, there was no clear winner, he said, as the fuels have to be tested at lower speeds, the supply chain needed to be thought out carefully, and training would be required if, say, liquefied natural gas were to be used on a bulker.

The discussion on alternative fuels however had to be led by the International Maritime Organization.

Michael Parker, chairman of global shipping, logistics and offshore at Citigroup, said that the IMO needs to use MEPC 77 — its next environmental committee meeting — to listen to what comes out of COP26 and accelerate the agenda or risk losing its role to national and regional government.

The IMO has been widely criticised for acting too slowly; it was after all a political organisation, being a UN body.

“We’ll be burnt to a crisp if we go at their pace,” he said, adding that it will be the cargo owners that will drive change, something already seen in the Sea Cargo Charter launched at the end of last year by the Global Maritime Forum.

The other initiative — the Getting to Zero coalition — already had 140 signatories from places such as Japan, the US and Greece.

Patrizia Kern, head of marine at Swiss Re, said that she actively supported the Poseidon Principles for insurance and collaborated in its drafting.

“For us, it’s a great opportunity,” she said, leading to dialogue with clients on their trajectory towards improvement.

“Insurers need to be ready to cover the additional risk brought by the use of new/zero emission fuels,” she said on the sidelines of the event.

“The financial and economic support/backing for the green transition by the insurance industry is of utmost importance. It’s not about insurers imposing restrictions on shipowners, but to understanding the opportunities this change provides and act now.”

“We have to be proactive to ensure our children’s future,” she said, adding that pressure on ESG matters will come from consumers.