The global climate crisis is reshaping industries across the board, and shipping is no exception. As one of the largest contributors to global trade, the shipping industry has an important role in the movement of goods. In this blog, let's explore how climate change is impacting the shipping industry and what that means for marine insurance.
How climate change is impacting the shipping industry
The effects of climate change are wide-ranging and shipping companies are increasingly facing operational challenges.
- Rising sea levels and port infrastructure: Many of the world’s ports are located at sea level. Rising sea levels are threatening to flood port infrastructure, disrupt operations and increase maintenance costs. According to the IPCC, sea levels have already risen by about 20 cm since 1900.
- Extreme weather events: Increased frequency of storms and cyclones leads to delayed deliveries, higher risk to crew safety and potential cargo damage. A study by the World Meteorological Organisation points to more intense and frequent storms worldwide.
- Increased fuel costs and emissions regulations: New regulations, like the IMO 2020 sulphur cap, are pushing shipping companies to reduce emissions. This means higher fuel costs and investments in cleaner technologies.
Role of marine insurance for climate change in shipping industry
- Coverage for weather-related damages: Policies now cover a wide range of climate-induced risks such as storm damage, loss of cargo due to high seas and port delays due to flooding.
- Adaptation to changing risks: Insurers are re-evaluating premiums and terms to reflect new climate risks. Areas prone to hurricanes or typhoons may see higher rates or restricted cover.
- Encouraging risk mitigation: Some insurance providers incentivise ships with eco-friendly designs and safety measures, promoting sustainable practices in the industry.
When shipping smaller, valuable cargoes especially prone to climate-related damages, a marine insurance policy can be an ideal solution. It protects one-time shipments and is especially useful for individuals or businesses that do not ship goods frequently.
Conclusion
Climate change isn’t just a distant environmental threat—it’s a pressing business issue for the shipping industry. Understanding climate change in shipping industry is essential not just for large carriers but also for small businesses that depend on imports and exports. With tailored options like single transit marine insurance, businesses can protect themselves from the financial shocks brought on by climate-related events.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure / policy wordings carefully for detailed information about on risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.