Insurers Mull Arctic Shipping Routes

Baker said the lack of historical data makes insurers' calculations hard

The prospect of increased shipping along Arctic routes has marine insurers considering the challenges and potential of the developing market, Platts reports.

Marcus Baker, chairman of insurance firm Marsh's Global Marine Practice, said insurers worry about the risk of pollution, since cold temperatures change the behaviour of oil and render dispersants less effective.

Yet he said insurers see the potential value in insuring Arctic voyages.

"The marine insurance market is soft so underwriters are happy to entertain new product development," he said.

"The market is happy to consider this as there isn't enough other business to go round at the moment."

Underwriters normally use historical data to assess the risks of any given journey, but since the Arctic routes are only beginning to see significant use there is little data available.

"The number of commercial ships going through the northern sea (route) is not giving enough data to satisfy underwriters at the moment," Baker said.

"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."

This issue, combined with the lack of crews with experience in the Arctic and the limited support facilities now in place, makes it hard for insurers to price the risks or even decide to insure a voyage.

One prediction by an advisor for Russia's icebreaker fleet suggests 40 million tonnes of cargo will move through the Arctic Northern Sea Route (NSR) in 2021, with the majority consisting of oil and gas from northern Russia.