Arctic Shipping: Navigating the Risks and Opportunities
The marine insurance industry has a host of safety and navigational concerns that could prohibit Arctic shipping for the foreseeable future.
It is likely that the degree of risk from ice damage to vessels making Arctic voyages, and the additional costs incurred for icebreaker escorts, will probably preclude the wholesale expansion of Northwest Passage transits in the short- to medium-term.
The melting of sea ice presents opportunities for international marine transportation networks in the Arctic, at least during the summer months. Recent discoveries of oil and the potential financial and time savings are making the Arctic routes more appealing to the shipping industry. Two viable Arctic sea routes exist, enabling ships to move between the Atlantic and Pacific Oceans, thus cutting the distance between East Asia and Western Europe.
The routes offer alternatives to the Panama and Suez canals, but they are not without risk. Extreme climate and weather conditions create unique hazards, including floating ice, thick fog, and violent storms. Despite new safety features, vessels remain vulnerable to ice damage, machinery breakdown, and more. The harsh environment also creates challenges for crews, few of which have been trained for or have experience in such conditions.
The international shipping industry is keen to start maximizing the opportunities afforded by Arctic navigation. Yet the marine insurance industry – essential to the commercial viability of Arctic transit – holds a host of safety and navigational concerns, which may limit and/or prohibit the possibility of rapid growth in Arctic transit for the foreseeable future.
In Arctic Shipping: Navigating the Risks and Opportunities, we detail several insurer considerations as well as challenges associated with Arctic transit.