T

he balance of economic power is rapidly shifting eastward. China is poised to overtake the United States as the world'€™s largest economy and purchasing power in Asia is expected to grow eightfold between now and 2030, according to Global Marine Trends.

The region'€™s rapid economic growth is leading to the rise of the '€œconsumer class'€, which is driving a significant increase in demand for consumer goods, imported food products and energy.

These products need to be transported around the globe and shipping is the primary vehicle. Take energy, for example. More than half of the world'€™s oil supply passes through the Malacca Strait '€” a key gateway connecting the world.

This growth in regional trade provides exciting opportunities for the region'€™s shipping industry, but it can also create challenges. Transporting goods across borders and time zones creates risk for vessels and those on board.

Due to heightened political tension, increased terrorist activity and piracy in many parts of the world, war and related risks are realities that the Asian shipping industry is facing '€” last year alone, 75 percent of the piracy and armed robbery attacks that took place globally happened in Asia.

Managing these risks is top-of-mind for both the industry and governments '€” and they'€™ve taken action. For example, Singapore, Malaysia and Indonesia joined forces to patrol the Malacca Strait and ships have increased security on-board. These actions have gone a long way to manage the challenges but they still remain an on-going concern.

For ship owners, managing all elements of the growing prevalence of war and related risks is key. The safety of their crew on board is paramount but the financial risk cannot be ignored. A ship may be worth tens of millions of dollars and with costly third party liability exposures to consider, a single incident could be catastrophic for a company without the right measures in place.

This is where war risks insurance can assist. It is designed to cover risks that ordinary third party liability (P&I) and hull insurance may exclude, such as liability, loss or damage caused by war, the use of weapons of war, terrorism and in some cases, piracy.

The UK, Canada, Greece, Norway and Japan have all established schemes to support ship owners and Singapore recently joined the ranks, following the launch of the Singapore War Risks Mutual (SWRM) in February this year.

The SWRM committee is largely drawn from its ship owner members, giving the facility a high level of autonomy. This model of '€œship owners supporting ship owners'€ also enables '€œdiscretionary insurance'€ '€” not available in the commercial market '€” which allow claims to be paid even if they are not expressly covered by the rules of the mutual.

The establishment of the SWRM allows this insurance to be underwritten on a mutualized basis from Singapore for the first time, which puts the ship owners in the driving seat as it removes time zone constraints in the negotiation of terms and speeds up the quoting of premiums.

This is particularly important when ships intend to enter an additional premium area and the owner and charterer want to know the costs involved '€” providing clear benefits for owners in this region.

The development of this mutual and others like it elsewhere in the world would not be possible without Government, industry, associations and private companies working together. All of these parties have a key role to play in driving the growth of the maritime sector and enabling the safe and efficient movement of goods around the globe.

We have seen this collaborative approach in action this week at Sea Asia 2015. The event, being held during Singapore Maritime Week, brought together leaders from across the industry and around the globe to look at, debate, analyze and argue these critical issues, in hope of developing effective solutions.

One of the areas discussed was risk management and I enjoyed the discussion on how we can build on the strong foundation that has been set.
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The writer is managing director of Charles Taylor Mutual Management (Asia) Pte. Limited, managers of The Standard Club Asia Ltd. The views expressed are his own.