Marine Insurance Aspects of the NWP

(by Karl Magnus Eger)


There is limited knowledge and research on the marine insurance aspects of the NWP, in contrast to the NSR research as previously presented.  In light of any expected increased marine transportation in the years ahead, there are several risk aspects which may imply that the insurance premium will be high to cover H&M and P&I. For instance, the combination of draft and severe ice conditions along the NWP would be significant risk factors and that would affect the insurance rate.

The standard route through the NWP, for instance, is draft limited to 10 meters. This has the potential to exclude many of the standard types of ship unless they are very lightly loaded. The deep draft routes via the Prince of Wales Strait (or M‘Clure Strait) would be suitable in this sense, but have the most extreme ice conditions in the Canadian Arctic. It is plausible that if sea ice melt in the central Arctic Ocean continues, as many climate models indicate, there is a potential for more mobile multiyear sea ice to be swept southward through the NWP. In terms of marine transportation in the NWP, ice conditions are likely to get worse rather than better. The observations also show a very high year-to-year variability of sea ice coverage on the NWP, an important factor of uncertainty when considering marine insurance. The severe ice conditions would be a potential damage to hull, which means that additional H&M insurance would be required in order to cover the risk. The P&I cost would most likely be very high for any ship owner that enters the NWP.

The Canadians have a very strict regime when it comes to shipping regulations, operating with control zones regulated by the ASPPR. One example is of the sinking of Arctic Ublureak in 1983, and when the Canadian government required that the vessel should be removed the following summer. The cost of wreck removal was probably borne by the P&I Club involved, not by the hull insurers, because the vessel was a constructive total loss and the cost of removing the vessel exceeded its value when recovered1 .

When considering the availability of icebreaker assistance it seems also quite limited. Currently there are six icebreakers available in the Canadian Arctic including the NWP, but only during the summer season (from June to November). However, two of the icebreakers are assisted to research projects. In addition, these are all diesel powered and far from as powerful as the Russian nuclear icebreaker fleet. Altogether, in light of any increased destination Arctic shipping activity, as anticipated2 , it is quite uncertain to what extent the assistance capabilities are. However, this will most likely exceed the insurance cost.

Regarding aids to navigation, it is quite limited on the NWP. For instance there is no DGPS system, in contrast to the southern part of Canada, which is an important safety capacity for ships operating in the NWP. In addition, the NORDREG ship reporting system is voluntary, which means that vessels are not required to report their entrance of the NWP. Even if there has been progress in the process of making the regulations mandatory, statistics shows that there are still ships not reporting their voyages on the NWP. In light of insurance, this will most likely increase the premium.


  •  1. Van der Zwaag et. al. (2009), p.41
  •  2. AMSA (2009), Arctic Marine Shipping Assessment, Report, PAME, Arctic Council, Terragraphica, Anchorage, April 2009

Karl Magnus Eger, 2010, Marine Insurance Aspects of the NWP, CHNL.©

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