The debate over establishing a viable shipping route in Arctic waters for some vessels in coming decades is gathering pace, with marine insurance companies now assessing the risks and rewards.
The insurance firm Marsh told a media briefing in London Aug. 19 that a soft marine market has stirred interest among insurers who are ready to explore all new business prospects.
Marcus Baker, chairman of Marsh’s Global Marine Practice, said the market is “happy to consider (Arctic underwriting) as there isn’t enough business to go around at the moment.”
He said the main worry for insurers is the risk of any spill in the Arctic where oil would react differently to cold temperatures and the effectiveness of chemical dispersants is sharply reduced.
There is also a drastic shortage of crews with experience in handling accidents in such a cold and dark environment, Baker said.
He said the traditional reliance among underwriters to draw from historical data in weighing the risks in determining premiums does not work in the Arctic.
Baker concluded that the current risks and unknowns make insurers “extremely wary about incurring large, high profile losses while the market is still in its infancy,” even though they are “largely supportive of the development of Arctic shipping routes.”
But for now it is “extremely difficult for marine insurers to price an insurable risk, or even agree to cover a voyage in the first place,” he said.
Canada v. Russia
For Canadian Prime Minister Stephen Harper, laying claim to the North Pole has become something of a personal crusade, partly explaining why he has made nine annual summer trips to the North during his time in office.
On this year’s tour in late August Harper has acknowledged that Russia’s growing military presence in the Arctic has become a concern, even though Russia has not yet engaged in the same aggressive moves that “we have seen in Eastern Europe. In fact, we have actually seen the Russian government actually operating within international rules.”
Even so, Harper said that because of Russia’s decision to rebuilt former Soviet-era military bases in its north and the fleet of nuclear-powered submarines and icebreakers that it has patrolling Arctic waters, there is no room for complacency.
The Northwest Passage route is estimated to reduce the distance between Southeast Asia and Rotterdam to 6,900 nautical miles from the existing 11,350 nautical miles, lowering transit times by 10 to 15 days.
Marsh suggested the big Arctic oil and natural gas discoveries by Russia over the past 20 years likely hold the initial key to using Arctic routes.
Changes in shipping patterns
A recently published article in the journal Climate Change by researchers at the University of Ottawa and Environment Canada, analyzed the historic changes in Arctic shipping patterns between 1990 and 2012, focusing on shrinkage in the extent and thickness of sea ice.
The study found that in the summer shipping season there has been an increase in activity, especially in the last decade.
Canadian Coast Guard data showed that overall vessel counts have increased by 40 percent from 2006 to 2007 and 20 percent from 2007 to 2012.
Fishing and community re-supply vessels, rather than major cargo shipments or resource development, made a minor contribution to the rising numbers, while tourism, research and government support services claimed the most significant share of the increases.
The University of Ottawa research determined the shipping season is extending to include the “shoulder” period in June and November, with the fall season showing the greatest decline in sea ice.
However, the researchers said the “presence of more ships, regardless of the factors influencing sector growth, in combination with more hazardous ice conditions, mean there is an exponential increase in the probability of incidents that will compromise safety, security and environmental sustainability.”
They emphasized that if Arctic shipping continues to grow, the pressure will build for investment in regional infrastructure, search and rescue capacity, pollution control measures, monitoring, research and regulatory enforcement.
“Attention and investment in Arctic marine transportation is essential in order to both manage the mounting risks, but also to support industry growth and community development.”
No ports of refuge
New research by the University of California, Los Angeles, predicts ice-strengthened ships will be able to regularly cross through Arctic waters by mid-century, forecasting that by 2040-59 the Northwest Passage and Russia’s Northern Sea Route will both routinely open in September, when ice cover is at its thinnest, to vessels with no ice strengthening at all.
Laurence Smith, a UCLA geography professor, said that once ice shrinks below 1.2 meters in thickness it can be traversed by moderately ice-strengthened ships, the kind that currently sail through the Baltic Sea, at which point the North Pole route “begins to kick in as being favorable.”
But he said it is unlikely there will be a major shipping lane going over the North Pole, given the remoteness of the area.
The UCLA research estimates that over the past 25 years ships had only a 15 percent chance of making an open-water passage transit, but that has grown to 17-27 percent in the current decade and will soar to 53-60 percent by mid-century, depending on the rate of climate change.
However, Smith said he would be “deeply concerned” if there is a temptation to sail open-water ships through Arctic waters, especially because the Northwest Passage has no current ports of refuge, limited navigational aids and distant search and rescue services.
Issues: mapping, legal claims
Other scientists, such as Michael Byers, a University of British Columbia Arctic policy expert, have said there is an urgency to map the Northwest Passage to standards of other shipping lanes.
Equally pressing is the need to resolve legal claims between Canada and the United States.
Byers told the Globe and Mail that that “we certainly have to think of the Northwest Passage by 2040, and probably a decade or two earlier, as an international shipping route.”
Transport Canada said 26 vessels crossed the Northwest Passage in 2011 (the latest number available) compared with five in 2001, while the Northern Sea Route counted 46 in 2013 and expects 60 this year.
A spokeswoman said the Canadian government is working with its provincial and territorial partners “to monitor and prepare for the expected changes in shipping in the Arctic.”
It is also hoping to work through the International Maritime Organization to develop a mandatory Polar Code, she said.
