Insurers Giving Arctic Routes The Eye

Marine insurance companies are currently assessing the potential risks and rewards of insuring ships for transit through the Arctic. In recent years, receding polar ice caps and the development of nuclear icebreakers has made the shipping industry consider the possibility of dramatically cutting transit times on certain routes by navigating through the Arctic, rather than the traditional Suez and Panama Canal options.
The northern sea route would cut the distance between Southeast Asia and Rotterdam to 6,900 nautical miles from 11,350 nautical miles and could potentially reduce the transit time by 10-15 days.
There have been huge oil and gas discoveries in Russia since the 1990s, and it is likely to be this industry that will be key to the development of the Arctic shipping routes.
The oil and gas development in northern Russia is significant. Ports such as Dickson, which is currently fairly unknown, will become commonly known ports because the oil and gas industry will develop them. It won’t be the containership industry that leads the way, it will be oil and gas.
A relatively weak marine market has encouraged insurers to closely study all avenues for potential business, and the potential Arctic shipping routes are ones that merit particularly sharp attention due to the unique set of challenges involved.
Underwriters traditionally rely heavily on historical data when assessing the risks and thus the premiums required for certain journeys, but such historical data is almost non-existent for the potential Arctic routes. However, according to brokers the number of commercial ships going through the northern sea (route) is not giving enough data to satisfy underwriters at the moment.