The shipping industry finds itself at a crossroads as it grapples with numerous challenges including the effect of geopolitical changes on shipping routes, the regulatory environment and the move to reduce carbon emissions.
As a globally vital and, by its nature, international industry, the maritime sector is affected by the changing geopolitical environment in numerous ways. Certain shipping routes have become temporarily unsafe or inaccessible, fuel prices are subject to often dramatic fluctuations and the global target to reduce emissions has been delayed, among other things.
The London marine insurance market, with its depth and concentration of marine risk expertise, is working hard to help shipowners to navigate this changeable environment.
Energy challenges
The maritime industry’s global effort to reduce its greenhouse gas (GHG) emissions stalled last year – in part because of political pressures. Implementation of the International Maritime Organization’s (IMO) Net-Zero Framework (NZF), which was set to apply from 2028, has been delayed.
The NZF would have imposed a penalty on ships that emitted GHGs above a certain threshold and introduced a global marine fuel standard - a "well-to-wake" GHG intensity metric for fuels that tightens over time, encouraging decarbonisation. Leaving aside any political arguments, there’s still a concerted effort within the maritime industry to reduce its reliance on GHG-emitting fuel sources.
This is not only driven by environmental and sustainability concerns. There’s also an energy security imperative for many shipowners to reduce their dependency on fossil fuels. The price of oil, always a hot topic for the marine market, remains subject to the supply and demand fluctuations that are so directly affected by geopolitical shocks.
Shipowners are mindful of the twin effect of a rising oil price, combined with the necessity of taking often longer routes to avoid conflict zones and political hotspots, on costs. We see a continued interest in new ship design to mitigate this risk – and to meet sustainability goals.
“Shipowners plan for emergencies all the time – they have to.”
New ship designs?
There are lessons from the past that shipowners and the marine insurance market can look to. In the 1960s, during the closure of the Suez Canal, we saw the emergence of Very Large Crude Carriers (VLCC) and later Ultra Large Crude Carriers (ULCC) designed to enable oil to be transported efficiently around the Cape of Good Hope.
As an insurance market then we adapted and found ways to underwrite the new risks associated with these gigantic ships. And today, as technology evolves to design and build new ships suitable for a lower carbon future, we can use our risk prevention and management expertise to feed into innovation in shipbuilding as well as underwriting those vessels.
Many of our clients are exploring nuclear propulsion as an alternative future energy source. In February, we became members of the Nuclear Energy Maritime Organization (NEMO).
NEMO aims to help national and international regulators create rules and standards for the deployment, operation and decommissioning of floating nuclear power and to ensure that nuclear can be safely integrated into the maritime sector.
Like many shipowners, we recognise that nuclear power is likely to be a key consideration in the future of ship design and operation. We believe that understanding the risks and opportunities associated with it will be vital to enabling the industry to scale its effort.
Demolition risks require attention too
The effects of geopolitical instability extend beyond their impact on decarbonisation. Ship demolition, an industry already sensitive to global trade flows and regulation, may also become more volatile.
The IMO’s Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (HKC) came into force in June 2025 and is intended to ensure that when ships are being recycled at the end of their operational lives they do not pose any unnecessary risk to human health or to the safety of the environment.
The HKC, however, presumes a relatively stable governance environment. Against the backdrop of rising geopolitical tensions, sanctions and realignment in international trade, access to compliant recycling capacity is increasingly shaped by political risk rather than technical readiness.
The result may be that some shipowners send older vessels to markets with weaker environmental or safety requirements. This has the potential for exacerbating environmental degradation, concentrating risk in under-regulated regions, and increasing reputational and financial exposure for shipping companies.
Regulatory uncertainty and regional or local politics also play into decisions about when ships are sent for scrap. The uneven nature of decarbonisation policy and targets may mean that older tonnage is scrapped earlier than is economically necessary as owners look to avoid future compliance risks and uncertainty.
There’s a real risk that a two-tier system will emerge, whereby some vessels are scrapped in line with HKC standards while other vessels might be recycled in places where regulation is more of a grey area. This could result in environmental and safety standards being unevenly applied across the global fleet.
We need to keep communication with our clients open, to work with them to understand these dynamics and help them to address these challenges.
Lessons from the past, focus on the future
The London marine insurance market, the oldest in the world lest we forget, has seen many twists and turns over its history. Geopolitical shocks, fluctuations in fuel prices and supply-chain pinch-points are, to a large extent, nothing new.
While the shape and the impact of these events is constantly shifting, as a marketplace we have the experience, expertise and risk prevention knowledge to help our clients to navigate an uncertain future.
Shipowners plan for emergencies all the time – they have to. Our role as an insurance market and collective of risk experts is to help them to minimize and mitigate risks like these and ready themselves for the future.
