Marine insurance crisis

The marine insurance crisis was the collapse of the market for marine insurance in 2021 and 2022, following attacks by Devourers on merchant shipping. Within about a year most underwriters had withdrawn cover from deep-sea routes, and most private shipping had stopped. The crisis caused famine in regions that depended on imported food, led to the failure of several insurers and reinsurers, and left H&A Logistics, sailing under naval escort, as the main sea carrier of the European Federation.

Background

Marine insurance covers ships, their cargoes and their owners' liabilities. Cover is a condition of most cargo finance, charter contracts and port access. War risks are insured separately from ordinary marine risks, under policies that can be cancelled at seven days' notice.

Before 2020 most of the world's marine cover was written in the London and Amsterdam markets, and much of the risk was passed on to reinsurers.

Course

First losses

The first attacks by Devourers on ships were recorded in early 2021, on small craft and coastal shipping off West Africa and South America. From mid-2021 Devourer packs attacked bulk carriers and container ships on open-ocean routes, sinking about 120 merchant ships by the end of the year and about 450 by the end of 2022.

Withdrawal of cover

Underwriters began cancelling war and parasite cover on the affected routes in mid-2021, and by the end of the year had cancelled it on most deep-sea routes. The London and Amsterdam markets gave as their reasons the absence of any record of past losses, and the repeated attacks on the same routes, which they said made the risk impossible to assess. The few policies still offered carried premiums higher than the profit on most cargoes. Deep-sea container traffic fell by about 80% between 2021 and 2023.

The losses passed to the reinsurers, and from 2021 to 2022 insurers in other lines, among them property and life, also restricted cover. Several large insurers and reinsurers were wound up.

Responses

In 2021 the European Federation set up a state reinsurance scheme for food and fuel cargoes sailing in convoys escorted by its navy. Most of the convoys were run by H&A Logistics, which owned its ships and cargoes and did not insure them. Other shipping companies laid up their fleets or sold them, many to H&A, at a fraction of their value before the crisis. From 2022 H&A was the Federation's primary contractor under the EF Integration Agreement, and the North Atlantic became a war zone in the Second World War.

Effects

Food

World food production did not fall in the first years of the crisis. Regions that imported most of their grain by sea, among them North Africa, the Middle East and much of southern and eastern Asia, had food shortages from 2021 and famine from 2022, before the infestation reached most of them. Europe produced most of its own staple food and moved it by rail, and its shortages came later, with the loss of farmland to the infestation.

Trade and transport

Ports lost most of their traffic: in 2023 the port of Amsterdam handled about a fifth of its 2020 tonnage. Freight within Europe and across Asia moved to the railways, which as of 2028 carry most freight between held regions, including on the Trans-Siberian Railway. Most of the remaining sea freight travels in escorted H&A Logistics convoys.

Financial markets

Credit tightened as banks stopped lending against uninsured assets. Share prices fell by about half across the market in the summer of 2021, insurance and shipping shares furthest. H&A, the largest shipping and port operator in Europe, fell by about 40%, and recovered by the end of the year as the only company still moving goods by sea on its own account. Trading on the Federation's exchanges has been thin since the mid-2020s, while banking and card payments in held territory have continued to operate.

See also

• H&A
• Devourer
• Held territory
• Trans-Siberian Railway