The continually expanding Arctic Ocean is about to receive a new set of shipping rules as members of the International Maritime Organization meet this week to discuss the future of the region. The rules, part of the Polar Code, could impact sales opportunities for carriers and producers selling ocean marine insurance—though not for some time, says American Institution of Marine Underwriters (AIMU) President John Miklus.
“The Polar Code is an interesting topic and it’s something we’re watching,” Miklus told Insurance Business. “The Arctic Ocean isn’t commercially viable yet, but it’s going to be at some point in the future, and the insurance implications are big, particularly if the polar ice cap keeps melting.”
The Arctic Ocean has already expanded greatly over the past 30 years, with summer sea ice shrinking by about two-thirds.
And while the waters are treacherous, the appetite for exploration among global gas and oil giants is plentiful. Up to a tenth of the world’s undiscovered oil and a third of its undiscovered gas are thought to lie under Arctic waters, Reuters reported, and a northern trade route would cut the sailing distance between Asia and northern Europe by roughly 40%.
Currently, no international conventions regulate shipping operations in the Arctic—something that concerns both global regulators and AIMU.
“If a ship gets in through [in the Arctic], the risks from an insurance point of view are tremendous,” Miklus said. “It’s a very unforgiving environment if something were to go wrong. It’s not like you can call up AAA and they’ll send out a tow truck. It’s going to be very difficult to salvage a ship that has a problem.”
The expected changes to the Polar Code have been years in the making, and are expected to regulate pollution, safety, training and certification for ships crossing the ocean. Additionally, any vessel traveling through the high Arctic—above 72 degrees north—must agree on a separate policy with its insurer to cover the associated risks.
A draft of the code is expected this week, the director general of the Norwegian Shipowners’ Assocation told Reuters, with rules going into effect by 2016.