Enhanced Marine Risks in the Arctic

from Lloyd’s Report 2012: Arctic Opening – Opportunity and Risk in the High North

Shipowners and shipping companies operating in the Arctic face a number of risks over and above the normal risks they would expect to face. First, there are increased risks to vessels owing to the remoteness, lack of infrastructure/support services and extreme weather conditions. Some of the factors, identified by the London market’s Joint Hull Committee, are as follows¹ :

• Ice contact (including icebergs)

• Propeller, rudder and associated machinery damage from ice

• Grounding on uncharted rocks

• Icing (November to March)

• Fog (worst in June and July)

• Collision

• Delay/lack of salvage exacerbated by remoteness

• Lack of information about safe ports.

These risks will be exacerbated by a number of secondary factors, which include:

• Poor maps

• Poor hydrographic and meteorological data

• Poor satellite navigation information and communication problems.

Shipping companies will also face greater environmental risks owing to the potential impact of their activities and operations on the Arctic environment. As noted by the Arctic Marine Shipping Assessment Report 2009 produced through the Arctic Council: “Whether it is the release of substances through emissions to air or discharges to water, accidental release of oil or hazardous cargo, disturbances of wildlife through sound, sight, collisions or the introduction of invasive alien species, the Arctic marine environment is especially vulnerable to potential impacts from marine activity² .” The potential impact was shown by the Exxon Valdez disaster in 1989 that occurred just within the 60° north boundary of the Arctic. The resulting oil spill spread over 300 square miles, caused devastation to the pristine environment of Prince William Sound and cost Exxon $4.3bn in clean-up and compensatory costs³ .

The enhanced physical risks, together with the environmental risks, will lead to greater liability risks (and therefore potential liability costs) including pollution and third-party death or injury. For example, removing bunker fuel can be more challenging not only because of the extreme conditions, but also because the heavy-duty fuel used is potentially more polluting and ships may be carrying more fuel to enable them to trade in remote locations. Also repatriation costs for crew and passengers could be much higher in the Arctic.

A specific risk facing shipping companies is the lack of charts to support safe navigation. In its 2009 report, the Arctic Council highlighted that significant portions of primary Arctic shipping routes do not have adequate charts. This is most critical in the Canadian Archipelago and the Beaufort Sea, as well as in other areas including the Kara Sea, Laptev Sea and East Siberian Sea along the Northern Sea Route. The problems caused by lack of charts are exacerbated by the poor communications network in the region.

Cruise vessels present a particular challenge for shipowners, regulators and insurers in the Arctic. Specifically, larger cruise ships that are moved from the Caribbean, Europe or Mediterranean to operate in the Arctic represent a genuine challenge. In the Canadian Arctic during the summer of 2010 the Arctic expedition ship Clipper Adventurer grounded on a charted reef. The challenges for passenger rescue and salvage were clear, even though this was not an ice-related incident. Clearly there is a need for protocols and strategies within the cruise ship industry to tackle the enhanced risks in the Arctic.

Charles Emmerson, Glada Lahn, 2012, Enhanced Marine Risks in the Arctic, Lloyd’s.©