The Future of Marine Insurance in an Increasingly Hostile World

The maritime industry is in uncharted territory. From climate change and extreme weather to piracy, geopolitics and cyber threats, the landscape of marine operations is becoming more complex and risky. These changing risks are forcing marine cargo importers and exporters to rethink their insurance strategies.

For South African importers and exporters, this is especially urgent. As a major hub for international trade, South Africa’s shipping industry must navigate increasing costs, regulatory changes, and evolving threats. This article examines the future of marine insurance in South Africa, the major risks facing the sector, and how businesses can obtain tailored insurance solutions to protect their operations.

The Growing Risks to Trade

Climate Change and Extreme Weather

The Durban floods in April 2022 serve as a stark reminder of the impact of climate change on trade. The heaviest rains in over six decades caused widespread flooding, damaged port infrastructure, and halted operations. These extreme weather events disrupt supply chains and incur billions in losses, prompting marine insurers to reassess risk models and coverage options (WITS University).

Rising sea levels, more intense storms, and unpredictable weather are leading to more frequent cargo damage, ship delays, and increased insurance claims. Recent storms along the South African coastline have highlighted the vulnerability of ports, shipping routes, and cargo storage facilities.

• Billions are lost globally due to severe storms disrupting maritime supply chains.
• Longer, more intense hurricane and cyclone seasons are disrupting shipping schedules.
• Vessels operating in high-risk climate zones are facing skyrocketing insurance premiums.

To mitigate these risks, marine insurers are offering climate-resilient policies that incorporate weather analytics and risk prediction models, providing businesses with adaptable and flexible coverage.

Piracy and Geopolitics

Piracy is a major challenge for international shipping, particularly in regions like the Horn of Africa, which also affect South African marine businesses. Geopolitical tensions—such as trade wars, sanctions, and territorial disputes—add to the instability, forcing vessels to take longer and more expensive detours.

• Piracy hotspots force ships to deviate from optimal routes, increasing costs.
• Hijackings and ransom demands contribute to rising marine insurance premiums.
• Geopolitical instability often results in amended policy wordings and coverage exclusions.

It is essential that the insurance cover selected adequately protects against piracy, hijacking, and ransom risks—whether covering single marine voyages or providing ongoing coverage for multiple transits.

Maritime Cyber Threats

In July 2021, Transnet, South Africa’s state-owned logistics company, was hit by a ransomware attack that disrupted operations at major ports like Durban and Cape Town (Reuters). This incident underscores the vulnerability of maritime infrastructure to cyber threats.

As shipping becomes increasingly digitised, cybercriminals are targeting vessels, ports, and logistics networks with ransomware, GPS spoofing, and hacking. In response, insurers are now offering specialized coverage—such as cyber insurance—to help maritime businesses safeguard their digital operations. For a deeper look at the rising cyber risks in the industry, check out our article on critical cyber threats.

• Major shipping companies have faced crippling cyber attacks, leading to multimillion-dollar losses.
• Cyber intrusions can manipulate vessel navigation systems, posing serious safety risks.
• New cyber insurance policies are emerging to address these digital threats.

Marine Insurance Costs

Higher Premiums for High-Risk Routes

Vessels operating through high-risk areas now face higher marine insurance premiums due to increased risks from piracy, climate-related events, and geopolitical instability.

• Longer routes result in higher fuel consumption and operating costs.
• Additional security and regulatory costs are incurred in high-risk zones.
• Frequent risk reassessments by insurers drive policy costs upward.

Cargo and Supply Chain Insurance

The cost of maritime cargo insurance directly affects every link in the supply chain. Delayed shipments, theft, and cargo damage force insurers to tighten coverage options and adjust premiums.

• Stricter cargo security measures are implemented to reduce theft risks.
• Supply chain disruptions lead to expensive claims for businesses.
• Advanced tracking and monitoring systems are increasingly factored into pricing models.
• Restrictions on vessel age can result in punitive excesses or policy exclusions.

The Evolution of Marine Insurance

Climate-Resilient Insurance Policies

Marine insurers are increasingly leveraging weather forecasting and climate risk analysis to develop more precise coverage options. New adaptive policies now include:

• Coverage for storm-related delays and damage claims.
• Seasonally adjusted premiums that reflect current climate risks.
• Enhanced cargo protection against weather-induced losses.

Piracy-Specific Coverage and Security Partnerships

Shipping companies are increasingly pairing security measures with insurance coverage to mitigate piracy risks. Strategies include:

• Dedicated theft, hijacking, and ransom coverage for piracy incidents.
• Partnerships with maritime security firms and onboard defense systems.
• Comprehensive policies that combine traditional coverage with risk-specific add-ons.

Cyber Insurance for Maritime Operations

As cyber threats escalate, marine insurers are rolling out cyber-specific coverage tailored for maritime businesses. This coverage helps protect against:

• Ransomware attacks on logistics and port operations.
• Financial losses from digital fraud and data breaches.
• Operational disruptions caused by cyber sabotage.

Key Steps for South African Marine Businesses

Know Your Risk Profile

Before securing marine insurance, it is essential for businesses to assess their risk exposure by considering factors such as:

• Identification of key shipping routes and the risks they present.
• Evaluation of the impacts of climate change on operations.
• Assessment of cyber vulnerabilities within your digital infrastructure.

Work with Expert Insurance Brokers

Marine insurance is complex. Berkley Risk supports South African businesses by connecting them with top insurers, assessing unique business risks, and providing tailored recommendations for comprehensive coverage.

Invest in Security and Proactive Risk Mitigation

Reducing marine insurance costs is achievable with strategic risk management. Companies can:

• Invest in vessel tracking and onboard security systems.
• Utilize predictive analytics for storm avoidance and fuel efficiency.
• Ensure compliance with international shipping regulations.

Conclusion

The shipping landscape is evolving rapidly as climate change, piracy, and cyber threats reshape the industry. Marine insurance in South Africa is adapting by offering robust, tailored policies that protect businesses throughout the supply chain.

By partnering with Berkley Risk, South African marine importers and exporters can confidently navigate these challenges. Get in touch today to schedule a consultation and discover the marine insurance solution that best fits your business needs.