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Summary of Working Paper No. 124-1999

IV.3.3 Shipping and Marine Insurance on the Northern Sea Route: Conclusions 1993-1998

By Edgar Gold, John A. Cantello, and Peter L. Wright, Oceans Institute of Canada, Halifax, NS, Canada

As indicated by the title, this Working Paper contains the conclusions of INSROP Sub-Project IV.3.3 which examined the feasibility of marine insurance coverage for shipping on the Northern Sea Route (NSR) during the period 1993-1998. Although it was quite apparent from its beginnings that the NSR would never become a practical reality if shipowners would not send their vessels through this navigational shortcut, the importance of obtaining adequate risk coverage for such navigation was probably not fully realized when INSROP first commenced. The principal terms of reference of INSROP Sub-Project IV.3.3 consisted of an examination of the marine insurance industry in order to assess if regular navigation on the NSR would be insurable. For the first four years of the Sub-Project, this was the principal task which concluded that marine insurers would be interested in providing NSR coverage if the shipping industry would use the route.

However, in 1997-1998 the Sub-Projects terms of reference were somewhat expanded in order to include a preliminary assessment of the shipping industrys interest in utilizing the NSR. It has become clear that it was not appropriate to simply examine marine insurance aspects without, at least, making such a preliminary assessment. Accordingly, this Working Paper not only summarizes the conclusions of the Sub-Projects marine insurance research work but also provides information on how the NSR idea is being viewed by the major shipping centresespecially in Asia, where the maximum benefit from the NSR could be derived.

Research results and data for the work carried out during the period 1993-1998 are provided in terms of: Northern Sea Route Initial Knowledge Base; Environmental Research; Commercial Aspects Research; and, Political and Legal Aspects Research. This leads to a Conclusions section in which a series of thirteen questions arising out of the Sub-Projects work receive responses. The overall conclusions reached indicate that whilst the major insurance markets are quite positive in providing adequate risk coverage for NSR navigation, the shipping industryi.e. the potential major usersare not yet committed to the new route. Nevertheless, it is also concluded that if one or more of the existing alternative sea routes would experience certain problems, that the NSR would become more attractive. Furthermore, the shipping industry itself needs to carry out further, specific research on the actual economic advantages of the shorter NSR over other routes. This type of research will be made much easier through the very significant data base accumulated by INSROP.