Marine Insurance Meets Permanent Instability
The Swedish Club recently declared that geopolitical instability is now a permanent feature of shipping.
Sanctions, tariffs, flashpoints, once “exceptions” are now constants. Ships rerouted. Contracts rewritten. Cargo delayed.
The Red Sea crisis makes this plain. Historical models focused on piracy, short-lived, opportunistic raids. But politically motivated attacks by Houthi rebels proved sustained, unpredictable, and far outside the bounds of those models. The consequences were immediate and severe:
Additional War Risk Premiums (AWRP) spiked overnight.
Standard warranty terms no longer applied, forcing insurers into case-by-case quotes.
“And for shipowners, the rerouting of over $1 trillion in global trade around the Cape of Good Hope added weeks to transit times and millions in fuel costs. This was not a localized disruption, it was a systemic economic shock.
Not because the sea has changed, but because the world around it has. And yet too often, risk is still measured by yesterday’s formulas. Historical averages. Dispersion rules. Probability charts that assume the past repeats itself neatly. But war doesn’t wait for an update cycle. Markets don’t move in symmetrical curves. And the sea doesn’t care about statistical neatness.
The Deeper Risk
We call this progress: more models, more automation, more efficiency. But what happens when those models are trained on a world that no longer exists? What happens when human intuition, alert to the anomaly, alive to the context is quietly replaced by algorithmic neatness?
This intuition has a name in the industry. It is the underwriter’s judgment, the ability to read between the lines of a risk report, weighing the political instability of a flag state or the reputation of a ship manager, factors no dataset captures. It is the underwriter's instinct, the caution to question a premium that looks too low for a volatile region, sensing the model has missed a ground truth. And it is the craft of creative structuring, the art of shaping tailored clauses like War & Strikes or Trade Disruption Insurance, beyond what any formula can spit out.
Insurance, shipping, trade… they don’t just face external risks. They face the risk of eroding these very skills.
A New Navigation Chart
The answer is not to abandon technology, but to use it differently. Algorithms can scan oceans of data, surfacing patterns no single human could. But they must remain tools, not oracles. In practice, this means treating the algorithm’s output as the beginning of the conversation, not the conclusion.
A risk score may suggest stability, but it is the underwriter or regional expert who notes that post-election unrest tells a very different story. It also means investing in new kinds of talent, data scientists who understand maritime law, political science graduates who can interpret vessel-tracking data, and professionals who can move fluidly between numbers and nuance. And finally, it means shifting focus from probability to plausibility. Machines calculate the odds. Humans weigh impact. A low-probability event with catastrophic consequences cannot be dismissed in the name of efficiency.
The purpose isn’t efficiency alone. It is resilience.
Final Thought
Geopolitical instability may be permanent. But so too is uncertainty itself. And no model, however elegant, can domesticate the random. The ultimate risk is not a single lost vessel, but the collective loss of our instinct to look beyond the spreadsheet and see the coming storm.
