Seas of Uncertainty: The Geopolitical and Legislative Factors Steering Maritime Risk in 2024
As we advance into 2024, the maritime industry faces many challenges shaped by the geopolitical landscape of the recent past. The year 2023 was marked by significant events that continue to influence maritime operations and risk. From the expiration of the Black Sea grain initiative to the rise of the ‘Dark Fleet’ amidst Russian sanctions, these developments have reshaped shipping routes and practices. Furthermore, the escalating geopolitical tensions, exemplified by attacks on maritime assets and the redirection of major shipping routes to avoid conflict zones, highlight the increased risks and operational complexities the sector has to face.
Additionally, the maritime industry is navigating the introduction of new regulations aimed at reducing emissions and promoting green shipping practices. These regulatory changes, coupled with the imminent crewing crisis and the advent of AI-driven autonomous vessels, present both challenges and opportunities for the future of maritime.
This article delves into the multifaceted impact of these developments on maritime risk, examining their implications for shipping operations, underwriting, and the global supply chain.
Impact of geopolitical landscape on maritime risk to look out for
Looking back in 2023, the impact of geopolitical crisis affected and will continue to affect shipping for the foreseeable future. The Black Sea grain initiative expired in July and at the same time Russia announced that shipping was from then on, a legitimate target. As a consequence, the shipments of grain are greatly reduced and are since using the new western route from Ukraine through Romanian and Bulgarian territorial waters. Hugging the coast is not the safest way to travel as it poses risks of groundings etc.
Due to the sanctions imposed to Russia we are also experiencing the rise of the ‘’Dark Fleet(ships operating on Paris MoU blacklisted flags of convenience)’’. These vessels are transporting fuel out of Russia and dispensing it out around the world. Some figures suggest that around 10-20% of the world tanker fleet is part of this dark fleet and as a result this means that they are potentially unclassed and uninsured.
What does this mean to underwriters?
Ships that are part of the dark fleet are usually older tankers that have been saved from scrapping. And what do old tankers have in common? They are generally in poorer condition, more prone to casualties and machinery failure. Additionally ship to ship transfers are also occurring and every time this happens there is a heightened pollution risk.
As an example, in May 2023, an uninsured tanker exploded in Southeast Asia killing crew. So, there are incidents happening but because we are talking about the dark fleet, we are not seeing the entire scale of the incidents.
Towards the end of the year Hamas attacks Israel and the Houthis attack ‘’Israeli’’ shipping in the Red Sea in a way to support Hamas. Reacting to this, the big shipping companies like Maersk, MSC, Hapag Lloyd, Evergreen and BP are diverting ships around the Cape of Good Hope, South Africa preferring the longer route instead of the presently more dangerous Suez Canal.
But going the long way doesn’t come without consequences. It adds additional time to the trip which also comes with additional fuel costs, underwriter risks and more chances of failure along the way. Notably, there are limited bunker and repair ports along the way on the coast of Africa and less frequent safe ports to call into. All that on top of the very severe weather conditions occurring at the Cape of Good Hope in certain periods of the year which could cause problems especially to larger container ships.
In simple terms, this means that maritime risks are increasing as with our local knowledge of S. Africa the infrastructure is not ready to handle the increase traffic. If a couple of big casualties occur in the area salvage capacity might be reached and we could witness a serious situation unravelling.
New and amended shipping regulations and the rise of Green Shipping
From the 1st of January 2024, The EU Emissions Trading System has been put in place. Ship operators will need to purchase carbon credits on the EU Emissions Trading System (EU ETS), where the ship calls in at least one EU port.
To begin, operators will need to buy credits reflecting 40% of the ship’s emissions on the voyage, but this percentage will increase year on year until 2027, when operators will in some cases need to buy credits reflecting to 100% of the ship’s emissions on the voyage.
Additionally, the IMO at MEPC 80 last year has changed the previous targets for decarbonisation. They are more stringed now and they have decreased the time limits/targets that we are going to achieve lower emissions.
A very positive change for the climate but another challenge for shipping in addition to what was already a challenge looking back at the same time last year.
The revised IMO GHG Strategy includes an enhances common ambition to reach net-zero GHG emissions from international shipping by or around, 2050, a commitment to ensure an uptake of alternative zero and near-zero GHG fuels by 2030, as well as indicative checkpoints for 2030 and 2040.
So what are the rules on the Carbon Intensity and Rating System?
From the 1st of January 2024 it is mandatory for all ships to calculate their attained Energy Efficiency Existing Ship Index (EEXI) to measure their energy efficiency and to initiate the collection of data for the reporting of their annual operational carbon intensity indicator (CII) and CII rating.
- 31 March 2024 – deadline for reporting first years CII data
- 31 May 2024 – deadline for issue of first Statement of Compliance based on CII data
Resourcing and Skills Shortage
This is a topic that keeps coming up almost every year but upon researching this year we’ve bumped onto some pretty astonishing figures. There is an estimate that by 2026 we are going to be short of 56,000 traditionally educated/trained ship officers. Not to mention the new skills and technology requirements for new fuels and technology.
The reason? People don’t want to go to sea anymore. From what we previously discussed at this point in time, going to sea and passing through the Suez Canal could by a direct threat to your life. Adding to that piracy and high threats of litigation imposed on the ship officers the long time and distances away from their families and not even being recognised as key workers, who can blame them?
From an insurers perspective educated and experienced crews are very important to reduce the risk of losses at sea so this is an insurance crisis as well.
Crewing Crisis or Autonomous vessels driven by AI?
So, what is the solution to the crewing crisis? One solution would be to move more quickly to autonomous ships, or crewing them remotely with the assistance of AI. This has been talked about over the last few years but in the past year we saw AI really come to the forefront with the different GPT tools.
Autonomous ships with AI are becoming increasingly feasible and we should expect this situation to move rapidly. Especially in conjunction with the lack of crew available this is becoming more and more a conceivable alternative.
The current estimate is that there are over 1000 remote and autonomous vessels operating around the world at this time.
Conclusion
As we have explored, the maritime industry is currently navigating through a sea of challenges and changes driven by geopolitical shifts and regulatory changes. The impact of these factors on maritime risk cannot be understated. From the operational disruptions caused by the expiration of the Black Sea grain initiative and the advent of the ‘Dark Fleet’, to the strategic adjustments in response to heightened regional conflicts and the redirection of major shipping routes, the industry faces a complex and evolving risk landscape.
The introduction of stringent environmental regulations and the shift towards green shipping practices represent a pivotal step towards decarbonising shipping, yet they bring their own set of challenges and compliance requirements. The looming crewing crisis, compounded by a global shortage of skilled personnel and the potential of AI-driven autonomous vessels, underscores a critical juncture in the industry’s future.
Moving forward, it is imperative for stakeholders across the maritime sector — from shipping companies to insurers and regulators — to stay agile and responsive to these changes. The ability to adapt to the shifting geopolitical and regulatory environment, to innovate in the face of technological advancements, and to manage the increasing risks with foresight and resilience will be key to navigating the uncertain waters ahead. The maritime industry’s journey through 2024 and beyond will undoubtedly be marked by these challenges, but also by the opportunities they present for growth, innovation, and sustainable progress.
And to close some positive news…
We are now witnessing the dawn of Green Container Shipping, with the alternative fuels that are coming our way. Although we are not going to go into detail, it’s worth mentioning the Laura Maersk, which was launched in 2023 is the world first container ship with the ability to be powered by a methanol-fuel engine.
By Paul Hill
Global Technical Director, Maritime, ABL Group
The content of this article was part of Paul Hill’s presentation at January’s ABL Maritime Market Briefing. You can view our video library with our past Maritime Market Briefings by clicking here.