HOW WILL CLIMATE CHANGE IMPACT MARINE INSURANCE?
There are very few people left in the world who believe climate change isn't happening and don't think it's our own fault. The vast majority of individuals, businesses and governments now acknowledge global warming is real, and human-emitted CO2 is the main culprit.
As the earth warms, so do the seas and oceans. Warmer waters are set to deliver real problems for shipping, with tricky issues they've not had to deal with before.
Here's how our changing climate might affect the shipping sector, and also impact cargo and marine insurance.
THE EFFECTS OF CLIMATE
UNCERTAINTY ON UNDERWRITING
Accurate insurance underwriting depends on numbers, on statistics, on patterns. When there are no reliable stats, you can't set sensible prices. Climate change science is fraught with uncertainty. It's a perfect storm. Nobody really knows exactly what will happen, when, where, how and to whom. And that means setting accurate, fair marine insurance premiums in future will be more of a challenge than ever.
BIGGER 'ROGUE' WAVES
Bigger storms, more frequent storms, and an increase in the size of freak waves are all on the cards according to scientists. As reported by the BBC on science environment, while rogue waves might become less frequent as climate change bites, they're also due to get a lot bigger.
US scientists have analysed 20 years' worth of data collected from buoys along the country's west coast, discovering that the years between 1994 and 2016 saw rogue waves decreasing slightly in frequency but increasing in height. Obviously huge waves coming out of nowhere pose a growing threat to the world's ships. Some of these monsters rise to more than 30m high, and can easily turn a ship over and send it to the bottom without a trace.
Apparently only one in ten thousand waves go rogue, and they have always threatened ships despite not being properly recorded or examined until the 1990s. Winter sees more than summer, not really a surprise, and winter rogue waves are almost always bigger. The research revealed how over just 20 years the height of the rogue waves increased 1% year on year. Not a lot in one year maybe, but over twenty years that's quite a hike.
What part does climate change play in creating these huge waves? There's evidence showing wind speeds are increasing over the oceans, or so says satellite data. And stronger winds mean bigger waves. At the same time waves are interacting with ocean currents, and those currents are themselves being affected by global warming.
It remains to be seen whether the findings from the research apply in every ocean, but there's no real reason to suspect they don't. And that means shipping across the globe will be at more risk than ever from the massive freak waves that have threatened shipping from the beginning of time.
CLIMATE-LED MASS MIGRATION
Shipping companies already suffer from pirate attacks. Imagine what's going to happen when much of the world's warmer areas become uninhabitable and the predicted mass migrations begin? That's going to make the oceans and seas a lot less safe for shipping, boats will be under more threat than ever before from stow-aways and boarders, and premiums will need to take the extra risks into account.
When any ship goes down or gets holed, there's pollution. More ships getting into trouble in extreme weather probably means the frequency and severity of these claims will also go up.
SEVERE WINDS AND SHIPPING DELAYS
South Africa, particularly Cape Town, often gets severe winds that delay shipping. 2018 saw some shippers lose containers thanks to the powerful winds. In 2014 a series of enormous empty shipping containers were actually pushed over by strong winds in the container terminal at Durban Harbour, which meant delays. And Port Elizabeth saw much the same thing in late 2018, losing 23 large containers in gales, most of which were never found. As you can imagine that led to some large and expensive loss of cargo claims. And if a stray container causes damage or hurts someone while floating free, it's a claim waiting to happen. Add potential increases in passenger and third-party liability claims and you can see why marine insurers are working so hard to re-calculate the existing risks and calculate the new risks the marine insurance scene is facing.
THE FUTURE IS ...... A MYSTERY
Nobody has ever been able to predict the future, of course, but so far insurers have done the best they can
with the available statistics. Now that climate change is here, one of the most important risks facing the
marine insurance industry today, our industry must move quickly and accurately to step in with relevant,
Around the world, ambient temperatures are rising. There are more extreme weather events associated with climate change than ever before, and it's a global concern. Climate change poses huge challenges to logistics and shipping companies. Our industry needs to re-evaluate the risks, invest in technologies that help us to detect and predict those risks better, and further develop the underwriting skills needed to mitigate those risks.
Some even say the biggest change of all will see shipping companies developing new technologies and other ways to boost the safety of ships, making them better able to weather the newly-powerful, more frequent storms we are already seeing.