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On 1 May, Denmark announced a bill that would provide full insurance for its merchant ships in the event of a major war.
The plan, which will be presented to the Danish Parliament in October of this year, will establish a state-backed insurance plan that will protect the country’s shipping industry from geopolitical uncertainty.
The plan was proposed by Danish Business Minister Morten Bødskov and aims to protect the 800-strong Danish merchant fleet from a war that would make the private insurance market collapse. It provides for a £680 million credit line to re-establish the Krigsforsikringsinstituttet (War Insurance Institute), a public entity that would administer the funds and cover any claims. The institute would be cost-neutral in peacetime.
The Institute, created in its current form in 1997, has not been operational for years. Instead, the current system would only have the state pay for two-thirds of the damage costs, with the shipping company paying the remaining third. However, in 1997, the total insured value of Denmark’s shipping fleet was £7 billion; it is now over £15 billion.
Denmark, home of shipping giant Maersk, heavily relies on its maritime shipping industry, which employs 3.4% of its population and is the country’s largest export sector. Danish ships and ports are also crucial to European and global trade: Danish shipowners transport 10% of global trade, and the country is ideally placed to receive ships from across Northern Europe.
The announcement comes as increased geopolitical tensions around the world make the future of trade more uncertain than ever. Even where risk is managed by trade credit or shipping insurance, all-out war or many localised conflicts could overwhelm commercial insurers, leaving shipping companies exposed.
The likelihood of this, even despite increasing international tensions, is tiny. However, it’s about “exercising due diligence,” said Bødskov. “We live in a more uncertain world. There are global tensions and a war on European soil. That’s why it’s important that we are prepared – even for the most unpleasant scenarios.”
