The decision by an international tribunal to rule against Chinese claims to rights in the South China Sea should have a limited impact on the insurance market, a marine specialist has said.
The Permanent Court of Arbitration, based in The Hague, ruled that there was no evidence that China had held exclusive control over the disputed waters or resources.
Andrew Brooker, founding partner of marine specialist Latitude Brokers, told Insurance Business that he “would not expect insurers to penalise the shipping industry by increasing premiums for trading through such an important area,” as the decision does not change physical risks to the vessel, crew or cargo.
“It is difficult to see any immediate effect on the global shipping market or the marine insurance market, which traditionally focuses on physical risks to the vessels, crew and cargo on board,” Brooker said.
“Unless the physical risk to vessels or crew changes as a result of this ruling, or there is an attempt to limit trade routes through the South China Sea, we do not anticipate any material impact on shipping.”
Whilst Brooker noted that “uuncertainty creates opportunities for both competition and new products where risks are developing that are not currently insured by existing marine policies,” this ruling “appears unlikely to create either of those positions in the near future.”
With a limited impact expected Brooker did noted that monitoring of the situation will be a must for those in the marine space.
“As brokers, we are constantly reviewing geopolitical risks for our clients,” Brooker said.
“As risks change, there can be a rapid increase in costs or a limit on available insurance protection which could affect not only their operating expenses, but also their ability to undertake certain trades.
“In that way, yes we consider there is a need to maintain a close watch on developments, but we don’t consider there is a need for the shipping community to be concerned at this point in time.”
