The President of the International Union of Marine Insurance (IUMI), Frédéric Denèfle, emphasized the importance of managing war risks in the maritime transport industry at the recent conference of the union in Rotterdam and highlighted the need for the development of new tools to support international trade in challenging conditions.
The Importance of Understanding War Risks
Denèfle stated in his keynote workshop: "As marine insurers, we are at the heart of the risks and must develop optimal tools to support global trade in all conditions, even in difficult circumstances." He referred to common misconceptions about war insurance and said: "Many believe that insurance coverage is automatically canceled when a crisis occurs. This is a misconception."
Challenges in Risk Assessment
Denèfle addressed the challenges in assessing war risks and said: "When the level of risk significantly increases, some insurers may issue a notice of cancellation of coverage. This allows the insured to reassess the risk and reinstate coverage under new conditions." He added that this notice does not mean the end of coverage and can be modified under new conditions so that both parties can jointly address the new risks.
Denèfle also discussed the additional information that insurers need for effective assessment of war risk coverage. He explained that insurers typically consider factors such as the age of the ship, flag, class, and trading history, but insuring war risks requires more detailed information about the intended voyage.
This information includes specific trading and transit areas, the duration a ship will be in high-risk areas, and the time required for loading and unloading cargo. Obtaining this information can be challenging for some cargo owners who lack precise knowledge of the voyage or transit arrangements.
Risk Mitigation Measures and CNED Complexities
Denèfle also emphasized the importance of risk mitigation measures, including the efforts of various countries to provide naval escorts and other forms of protection. He said: "Although these measures are highly appreciated, insurers cannot fully rely on the existence of this protection on every voyage."
Another complexity is the risks of CNED (confiscation, nationalization, or expropriation), which can significantly increase during times of war. Denèfle stressed that understanding the exact duration of a ship's operation in high-risk areas and the time required for loading or unloading cargo is very important.
He concluded by saying: "War risk coverage has become more common now, and it is essential for ship and cargo owners to know that insurers require more information than before to create contracts that are suitable for the conditions. Global and blanket coverage is no longer an option."
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