Unpacking the risks associated with rerouting around Africa

Red Sea situation sees insurers re-examining risk landscape

Underwriters are becoming more cautious in their dealings with vessels traversing high-risk regions and the Red Sea as well as other conflict zones are impacting on risk assessments for hull underwriters.

Chairing the Ocean Hull Workshop at the International Union of Marine Insurance (IUMI) 150^th annual conference in Berlin (Germany), Ilias Tsakiris, General Manager of American Club Europe, CEO of Hellenic Hull, and Chair of IUMI’s Ocean Hull Committee raised the impact of geopolitical tensions on global trade routes.

He pointed to the ongoing Red Sea crisis, where the activities of the Houthi rebels had led to considerable disruption. “Many shipowners are avoiding the Suez Canal, choosing longer routes around Africa to safeguard their vessels and crews,” Tsakiris said.

“The lack of salvage and repair facilities on these alternative routes means that even minor incidents can escalate into significant claims.”

Tsakiris noted that the consequences of these longer routes included the risk of unfamiliar waters and the necessity to call at less developed ports. “The lack of salvage and repair facilities on these alternative routes means that even minor incidents can escalate into significant claims,” he said.

In addition to the operational risks, Tsakiris addressed the environmental toll of these rerouted voyages. With longer distances come increased fuel consumption and higher emissions, he noted.

“Whilst, CII rating may seem improved, the ships are burning more fuel as they take these longer routes which directly impacts the industry’s carbon footprint. This is a serious concern as we work towards reducing emissions in line with international targets. We need to find solutions that not only meet regulatory requirements but also genuinely reduce the carbon impact of global shipping.”

Future outlook

Looking towards the future, he highlighted the industry’s ongoing efforts to support the transition to more sustainable shipping. “The push towards dual-fuel vessels and the exploration of alternative fuels is changing the makeup of the global fleet. New vessel deliveries are strong, but we’re also seeing an ageing fleet, which brings its own set of challenges.”

One major concern is the growing “dark fleet”—vessels with unclear ownership and often dubious classification. “This so-called ‘dark fleet’ presents significant risks for marine insurers. These ships are often operated by questionable entities and their lack of transparency makes it difficult to assess liability in case of accidents or pollution. This is a growing concern for marine insurers.”

Despite the many challenges facing the industry, Tsakiris reaffirmed IUMI’s commitment to promoting excellence in underwriting. “Education and expertise are more important now than ever,” he said. “Through initiatives such as the soon-to-be announced IUMI Masterclass in Hull Insurance, we are ensuring that our professionals have the skills they need to navigate these complex times.”