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Risk Mapping
Proactively map potential worst-case scenarios, including direct attacks and broader conflicts, to understand their impact on your operations.
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Proactively map potential worst-case scenarios, including direct attacks and broader conflicts, to understand their impact on your operations.
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Be aware of how regional conflicts can affect overall economic stability and operational costs, including potential inflationary pressures.
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Develop robust claims management protocols to expedite processing and ensure that coverage aligns with your operational needs during crises.
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Establish clear communication protocols to maintain stakeholder alignment and timely information flow during emergencies.
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Stay vigilant regarding emerging risks and evolving regulations to ensure your insurance coverage remains relevant and effective.
Distinguishing between declared and undeclared war, particularly in a region where non-state threat actors play a significant role, is fraught with complexity. Understanding these gray areas is especially essential when determining insurance coverage. In the Middle East, the insurance market has reached a point where it now recognizes the ongoing state of conflict, which reflects the severity of the situation and can inform proactive risk management strategies.
Underwriters are reassessing their risk appetite, leading to more stringent conditions and coverage limitations. Understanding these shifts is crucial for clients, as they directly impact operational costs and risk management strategies.
Clients are shifting toward insurance policies covering political violence including war coverage to ensure they are adequately protected in the event of declared or undeclared hostile action between two or more nations, states or non-state actors.
The marine insurance market has seen significant claims from recent events, including missile attacks and piracy incidents. Loss projections indicate that 2024 may be a turning point for increased claims. Businesses must stay informed about these trends to anticipate potential cost implications.
Understanding the increased threat level is vital for maritime operations, necessitating enhanced security measures and vigilant monitoring. Key risk scenarios for marine clients include:
Ship operators should exercise caution in high-risk areas and implement robust threat assessments.
Energy and power clients operating in the region face significant challenges. As essential services providers and critical infrastructure operators, they are direct targets. Recent incidents have underscored the need for robust coverage that cannot be easily canceled amid rising threats.
For example, in March 2022, Houthi rebels launched a series of attacks on Saudi Arabian oil facilities, including sites operated by the state oil company Aramco. These attacks involved drone strikes and missile launches targeting key infrastructure in Jeddah and other locations. The attacks led to temporary disruptions in oil production and highlighted the vulnerability of critical energy infrastructure.
The Houthi threat has become a significant stress test for the marine war insurance sector, compelling insurers to refine their coverage and emergency response capabilities. Consequently, marine war insurance policies are evolving, and shipowners and charterers must recognize how these policies indemnify vessel owners for losses and the nuances of coverage.
Recent discussions have clarified potential misconceptions about the Nordic Plan, which offers robust coverage tailored to Houthi-related incidents. This Plan is structured as a package, encompassing hull and machinery, loss of hire and liability insurance.
As the Houthis continue to exert control in Yemen, their activities are viewed as part of a broader geopolitical conflict, leading to an interpretation of their actions as if they were a legitimate state power under the Nordic Plan. This interpretation enables insurers to provide coverage that encompasses various conflict-related scenarios, reinforcing the Plan's adaptability to the new realities of maritime security threats.
Capability Overview
Marine Insurance and Risk Management
Capability Overview
Crisis Management
Topic Overview
Supply Chain Resilience
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4 Ways to Build Resilient and Agile Supply Chains
To enhance operational resilience, businesses must develop comprehensive continuity plans that address potential disruptions. This includes assessing critical functions, identifying vulnerabilities and implementing strategies to maintain operations amid escalating risks. Prioritizing robust contingency measures can help minimize downtime, safeguard assets and ensure service continuity.
Clients operating in the region are particularly concerned about the potential closure of the Strait of Hormuz, a crucial maritime chokepoint through which nearly 30 percent of the world's oil and gas supplies pass.4 If the Strait were closed, food security could become an issue, and industries reliant on imported goods, raw materials and energy supplies would face delays and increased transportation costs. Vessels may have to take longer alternate routes around Africa, significantly increasing shipping times and costs.
A strike on critical infrastructure also has the potential to cause significant disruption, as highlighted by Russia’s recent missile strikes on Ukraine’s power infrastructure. A strike on a power station in the Middle East that resulted in damage to onsite assets would not only lead to property damage costs, but also trigger business interruption coverage as the insured's operations would inevitably be disrupted. Such events can have cascading effects on clients and communities, emphasizing the importance of robust insurance products and proactive measures to mitigate impacts.
Talk to your risk advisor to access advice and solutions that can help your organization manage risks related to the ongoing conflict.
Rabih Asmar
Executive Director, Corporate Risk Solutions & Affinity, UAE
[email protected]
Tom Bomford
Director, Marine Hull, Global
[email protected]
Karthick Gowrisanker
Regional Head of Marine, UAE
[email protected]
Louie Grainger
Associate Director, Political Violence, UAE
[email protected]
Jord Oostrom
Chief Commercial Officer, Middle East
[email protected]
1 MSC Aries: what could happen from an insurance perspective? I SlothSea
2 Communication from the Secretary-General to Member States’ Representatives (Updated version – 11 September 2024) I IMO
3 Houthi explosive drone boat attacks escalate Red Sea danger I Reuters
4 Strait of Hormuz: Why the oil shipping route is a focus of worry again I Bloomberg
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