Marine insurance plays a crucial role in the global shipping and maritime industries, providing essential protection against the countless risks associated with transporting goods over water. From cargo losses due to storms and accidents to liabilities arising from environmental damage, marine insurance covers a broad spectrum of potential hazards.

As global trade continues to expand, understanding marine insurance becomes essential for anyone involved in shipping, logistics, or maritime business, ensuring that they are prepared for the unpredictable nature of the sea. In this issue, Robban Assafina is exploring the importance of marine insurance in the maritime industry with experts’ perspectives to shed the light on major claims and mandatory coverages.

H&M and P&I Policies

As marine insurance is essential for any damage or loss associated with cargo and vessels, there are challenges arising when insurers and shipowners alike must navigate a complex landscape of H&M and P&I policies. For Amgad Wanis, Managing Director at Brandenburg Marine Insurance Brokers, marine insurance is vital for the shipping industry, protecting against financial losses from cargo and vessel damage. 

Wanis explains, “both insurers and shipowners face numerous challenges, including the complexity of Hull and Machinery (H&M) and Protection and Indemnity (P&I) policies, which have distinct coverage scopes. Navigating differing regulatory environments complicates claims processes, while changing risk profiles due to factors like piracy and environmental regulations necessitate ongoing policy adjustments. Accurate asset valuation for coverage is also challenging, as market conditions and depreciation fluctuate. Claims handling can be complicated by disputes and the need for coordination among various parties. Additionally, emerging risks like cyber threats and increasing environmental pressures require insurers to adapt policies accordingly. Overall, the maritime industry's complexity demands that both insurers and shipowners remain vigilant and adaptable.”

From IPANDI CEO, Amir H Mosadeghi’s viewpoint, navigating the complexities of H&M and P&I policies presents several challenges for both insurers and ship owners. A primary difficulty lies in understanding the nuanced coverage differences and overlaps between H&M and P&I policies. While H&M policies primarily cover physical damage to the ship itself, P&I policies focus on third-party liabilities, including cargo damage, pollution, and crew claims.

Mosadeghi states, “ensuring no gaps or duplications in coverage requires meticulous coordination between insurers and ship owners. Additionally, the global regulatory landscape adds another layer of complexity, as different jurisdictions have varying regulations and legal requirements that can affect claims handling and the extent of coverage. Moreover, emerging risks like cyber threats, climate change, and geopolitical tensions further complicate the insurance landscape, necessitating a more agile and forward-thinking approach.”

According to Arun Natarajan, Head of Marine – MENA at Mercer, there are currently many issues at play in navigating the current marine insurance landscape, and associated losses or damage to cargo and vessels. Foremost, as the industry moves to more eco-friendly fuel options, this is resulting in higher cost of OPEX for ship owners and uncertainty on the impact of fuel on machinery. Natarajan continues, “Both clients and insurers are faced with the rising cost of claims, which is largely attributed to mounting repair costs, replacements costs, and legal fees, for example. While global insurance rates are stabilizing, continued uncertainty makes it challenging for clients to budget their premium spends, which can create balance sheet uncertainty. Change in legislation is also putting more emphasis on legal liability exposures, and cyber threats are always top of mind.”

Keys to Protections

As insurers often require proof of proper maintenance and compliance with regulatory standards as a condition for coverage, ship owners ensure that they can protect themselves from financial risk associated with unforeseen incidents in different ways. Mosadeghi believes that to protect themselves, ship owners must ensure their vessels are in top condition and comply with all relevant regulatory standards. Also, a proactive approach to maintenance and adherence to safety protocols is essential.

Mosadeghi adds, “a key element in this process is the utilization of survey reports conducted by independent surveyors at our request. These reports provide a detailed assessment of a vessel's condition, identifying any potential issues that could compromise safety or lead to costly claims. By thoroughly reviewing these survey reports, ship owners and charterers can pinpoint areas needing immediate attention, such as structural repairs, equipment upgrades, or compliance adjustments. Acting promptly on the findings ensures that any deficiencies are corrected before escalating into significant problems. This proactive stance helps maintain the vessel's insurability and demonstrates a commitment to best practices, which insurers highly value.”

From Amgad Wanis’ side, shipowners can protect themselves by adopting several key strategies such as regular maintenance and inspections, adherence to regulatory standards, documentation and record-keeping, investment in technology, crew training and competency, risk management and mitigation plans, regular audits and surveys, insurance coverage review, collaboration with classification societies, and proactive environmental and safety measures. 

“By focusing on these areas, shipowners can not only meet the requirements set by insurers but also significantly reduce the financial risks associated with unforeseen incidents, thereby protecting their investment and reputation in the maritime industry.”
Shipowners that have good governance in place ensure that the vessels are maintained well and will have the appropriate allocation of capital in their balance sheet for regular and planned maintenance, including drydocking, as Natarajan believes. “Further, they invest in either developing a good in-house technical team for management and maintenance, including crewing management and training or deploy reputable ship management companies. In addition, they will use robust broking and insurance channels to buy their insurance products. These governance measures will also include investment in robust IT systems including blockchain technology. However, not all shipowners have the wherewithal or the intention; some still treat their insurance product as a maintenance contract.”

Environment of Technology

In the era of technology, insurers are increasingly embracing technological advancements to enhance their operations and improve customer experiences. Arun Natarajan says that the insurance market is constantly changing and adapting to the changing technology environment. Natarajan adds, “they are adopting digital transformation to improve their process, efficiencies and customer interaction.  Many insurers have invested in data analytics and AI for risk assessment and claims modelling, and also are trying to bring in sophistication in their product offering including natural catastrophe modelling. Some major insurers have perhaps also invested in blockchain technology.”

Amgad Wanis mentions that the key adaptations include utilizing data analytics and AI for more accurate risk profiling, integrating telematics and IoT for real-time vessel monitoring, and employing predictive maintenance to prevent costly mechanical failures. Wanis continues, “insurers are developing cybersecurity policies to address the increasing risks of cyberattacks, exploring blockchain for streamlined claims processing, and using drones and satellite imagery for efficient inspections. Digital platforms are automating processes, enabling customized policies based on real-time data, while virtual and augmented reality tools enhance risk training and assessment. Collaboration with insurtech companies further drives innovation, allowing insurers to meet the evolving needs of the maritime sector effectively.”

From another perspective, Mosadeghi explains how insurers are increasingly adapting to technological advancements to enhance services, streamline operations, and better manage risks, which is by incorporating advanced data analytics, digital platforms, and automated systems, organizations can enhance risk assessment, streamline claims processing, and improve customer service. “A sophisticated interconnected system can transform access to insurance information, allowing instant retrieval of vital data like cover notes, claims history, and compliance documents. Embracing these technological advancements prepares stakeholders to navigate the shifting maritime landscape, promoting safety, compliance, and operational efficiency. With nearly two decades of experience, it’s clear that leveraging new tools and resources is vital for success in an ever-changing world.”

Cyber-Security Threats

With the raising of cyber threats in the maritime sector, insurers have to deal with balancing digital innovation with data security. From Mosadeghi’s point of view, as cyber threats continue to rise in the maritime sector, insurers face the challenge of balancing digital innovation with robust data security measures. Cybersecurity is critical in our industry, where increasing reliance on digital systems and interconnected technologies exposes vessels and operators to significant risks, such as data breaches, ransomware attacks, and system disruptions. Recognizing the critical importance of cybersecurity, the maritime sector is committed to protecting stakeholders from evolving threats.

Mosadeghi explains, “staying informed about the latest reports, circulars, and industry developments ensures that policies and practices remain effective. Proactive communication about emerging cyber threats, along with guidance on best practices—such as implementing strong security protocols, conducting regular system updates, and providing employee training—enhances overall preparedness. Improving digital infrastructure with robust security measures allows for confident use of innovative tools without compromising safety. Balancing innovation with security is essential for fostering a resilient and secure maritime community.”

Natarajan believes that the International Maritime Organization (IMO) is countering cyber risk by introducing cyber security management as a part of its wider safety management guidance. Also, Compliance to this safety management system is an express warranty under marine insurance policies especially H&M and P&I.

From another perspective, Wanis mentions that insurers in the maritime sector are proactively addressing the increasing cyber threats associated with digital innovation by implementing a range of strategic measures. They are developing specialized cyber insurance policies to cover risks like data breaches and ransomware, while also strengthening their own data security protocols with robust measures such as firewalls and encryption. Incorporating cyber risk assessments into underwriting helps adjust premiums based on shipowners' cybersecurity practices, encouraging better security investments.

Wanis adds, “collaborations with cybersecurity experts and education for ship crews enhance awareness and preparedness against cyber threats. Additionally, insurers are using advanced technologies to detect potential risks, promoting compliance with international cybersecurity standards, and emphasizing the importance of incident response plans. Regular audits ensure cybersecurity measures are effective, and fostering a culture of security promotes proactive efforts. These steps enable insurers to balance the benefits of digital advancements with robust protection against cyber threats, safeguarding both their interests and those of their clients.”

Shipowners' Compliance with Seafaring Standards

Marine insurers play a pivotal role in influencing shipowners' adherence to global seafaring standards. Natarajan says that the policies have an implied warranty of due diligence and expresses warranties as to class and safety management system compliance. When the industry brings in new regulations such as cyber regulation, insurers seek to match this by bringing in marine cyber insurance products. Also, When the industry brought in fuel regulations and the shipping world started to install additional equipment such as scrubbers, insurers - especially the P&I Clubs - undertook an exhaustive study to bring in risk management parameters. Natarajan continues, “in my opinion, the Hull and P&I Clubs probably will have to work more closely especially in view of the changing landscape in the world of shipping.”

From another perspective, Wanis believes that Marine insurers significantly influence shipowners' adherence through various mechanisms. They often require compliance with international regulations, such as those set by the IMO, as a condition for coverage. Risk assessments lead to differentiated premiums, rewarding compliant shipowners with lower rates, thereby encouraging high operational standards. Insurers may mandate regular audits and inspections to verify compliance, and non-compliance can result in denied claims or reduced payouts, further motivating adherence. “Additionally, insurers collaborate with industry stakeholders to promote best practices and leverage technology for real-time compliance monitoring. They also provide educational resources and guidance on navigating legal requirements. By incentivizing innovation and offering crisis management support, marine insurers help ensure the maritime industry operates safely, efficiently, and in line with international standards.”

As for Mosadeghi, insurers set benchmarks for coverage closely aligned with international regulations and best practices in maritime safety, environmental protection, and crew welfare. By requiring compliance with these standards as a condition for insurance coverage, marine insurers effectively drive ship owners to maintain high levels of operational excellence and regulatory adherence.

Safeguards Against Piracy 

In an era of evolving maritime threats, marine insurance seeks to offer adequate safeguards against contemporary piracy. According to Wanis, marine insurance offers essential protections against piracy, but their effectiveness can vary based on policy terms, voyage nature, and operating regions. Key coverage types include Hull and Machinery (H&M) insurance for physical vessel damage, War Risk insurance for piracy-related acts, and Kidnap and Ransom (K&R) insurance for ransom negotiations and support. Protection and Indemnity (P&I) clubs cover liabilities and provide legal assistance. Insurers may incentivize preventative measures, such as equipping ships with anti-piracy technologies. Wanis adds, “however, challenges exist, including policy exclusions, evolving piracy tactics, rising premiums, and complex legal regulations. Ultimately, the adequacy of marine insurance against piracy relies on careful policy management and proactive risk mitigation by shipowners, alongside collaborationwith insurers and regulatory bodies.”

Whereas, from Mosadeghi’s viewpoint, the offers provide shipowners adhere to the established guidelines and policies. “These policies are meticulously crafted to address the dynamic nature of piracy threats, with specific requirements that shipowners must agree to before coverage is issued. A key safeguard is the identification of high-risk areas, carefully studied and defined based on the latest intelligence and threat assessments. By following recommended routes and adhering to our safety protocols, ship owners can ensure safer travels, knowing their vessels and crew are less likely to encounter piracy threats.”

For Natarajan, marine cyber insurance products offer a comprehensive coverage and solution to the risk of cyber threats associated with maritime piracy. “However, H&M and P&I insurers currently have very little to offer, despite the fact that H&M and P&I policies do cover the risk of conventional piracy.”

Key Challenges

Furthermore, there’re major challenges facing the marine insurance industry to deal with. Mosadeghi believes that the major challenge is navigating global regulatory changes, which vary from region to region and can impact insurance coverage and claims handling. The increasing frequency and sophistication of cyber threats pose risks to both physical assets and sensitive data, while environmental concerns and the impact of climate change present unique challenges requiring insurers to adapt to rising risks associated with extreme weather events.

According to Wanis, the marine insurance industry encounters several challenges due to the ever-changing maritime landscape, including evolving risks, technological advancements, and regulatory shifts. Major issues include the complex nature of risks such as piracy and cyber threats, which require insurers to continuously adapt their assessments and coverage. Technology, while improving efficiency, also introduces new vulnerabilities. Insurers must stay informed about changing regulations to ensure compliance and provide proper client guidance. 

Wanis continues, “climate change is increasing the frequency of extreme weather events, necessitating adjustments to risk models and premiums. Global economic fluctuations can impact trade volumes and shipping companies' financial stability, while fraud and compliance issues threaten industry integrity. Lastly, intense market competition pressures insurers to offer lower premiums, potentially undermining profitability amid rising claims.”

Finally, Natarajan says that challenges include the increasing frequency and severity of natural disasters, a changing political landscape globally, and difficulties in global trade. Moreover, the industry must navigate complex legal and compliance regulations, particularly regarding cyber and data protection. There are also concerns related to talent acquisition and retention, as well as a lack of cohesion within the insurance sector itself, all of which complicate its operations and effectiveness.

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	Issue 94 of Robban Assafina (Nov/ Dec. 2024)