Melting ice magnifies Arctic risks
30 September 2008
The news that Lloyd’s insurer Catlin is sponsoring a major scientific expedition to capture vital data for scientists studying the impact of global warming on the Arctic ice cap is a further sign of increasing concern at the uncertain future of the region.
Research shows that the extent of Arctic summer sea ice is decreasing due to climate change. Last year saw a record minimum and researchers believe that ice extent in 2008 will be below 2005, which was the second lowest year on record.
The project—the Catlin Arctic Survey— will be led by British explorer Pen Hadow. The programme of measurements will include some of the most accurate and detailed observations of the thickness of the permanent Arctic ice. The measurements will be taken as part of a pioneering surface survey over a 1,200-mile route from the Canadian coast to the North Geographic Pole, beginning in February 2009.
Announcing the sponsorship, Stephen Catlin, chief executive of Catlin Group Limited, said: “As a speciality insurance/reinsurance company, the potential effects of global warming will have a direct impact on our business. However, there are gaps in our knowledge and much of the evidence regarding the pace of global warming is not scientifically proven.”
First map of the Arctic
The melting ice also has significant global consequences for planning in political, economic and business terms. There are already political tensions over access to what could be as much as 20% of the world’s remaining untapped oil and natural gas below the Arctic Ocean.
The first ever map of the Arctic to show the disputed territories that states might lay claim to has been drawn up by researchers at Durham University.
The Durham map shows where boundaries have been agreed, where known claims are and crucially the potential areas that states might claim. Martin Pratt, Director of Research at Durham’s International Boundaries Research Unit (IBRU), says the map is the most precise depiction yet of the limits and the future dividing lines that could be drawn across the Arctic region.
“The freezing land and seas of the Arctic are likely to be getting hotter in terms of geopolitics; the Durham map aims to assist national and international policy-makers across the world,” he said.
Staking claims
Last year Russia planted a flag on the seabed, underneath the North Pole, highlighting its claim to a huge chunk of the Arctic.
The Russian demands relate to a complex area of law covered by the United Nations Convention on the Law of the Sea Convention (UNCLOS). Under that law, any coastal state can claim territory 200 nautical miles from their shoreline (Exclusive Economic Zone, EEZ) and exploit the natural resources within that zone.
Some coastal states have rights that extend beyond EEZ due to their continental shelf. Areas of the seabed beyond the continental shelf are referred to as ‘The Area’ and any world state – landlocked or not – has equal rights in this area.
The continental shelf is the part of a country’s landmass that extends into the sea before dropping into the deep ocean. Under UNCLOS, if a state can prove its rights, it can exploit the resources of the sea and the seabed within its territory.
Russia claims that its continental shelf extends along a mountain chain running underneath the Arctic, known as the Lomonosov Ridge. Theoretically, if this was the case, Russia might be able to claim a vast area of territory.
The Lomonosov Ridge is just one area of contention between countries. Others involve Canada, USA, (Greenland) Denmark, Iceland and Norway.
Mapping risks
The IBRU map shows what is currently possible and what might be permissible in terms of territorial claims under international law. It also highlights the areas of land and sea where clashes of interest are likely.
The Lloyd’s insurance market is an important centre for political risk insurance and Lloyd’s insurers can cover confiscation, political violence, contract frustration and related perils.
Simon Low, political risks underwriter at Ark Underwriting sees a big role for insurance among businesses operating in the region in the future: protecting people against political violence, or assets against seizure as well as contract frustration through force majeure, for example. “If there is proven legal title and the insured isn’t acting illegally, we can provide insurance,” Low says.
But as Low says, disputes over territory can have a knock on effect in the wider world of political risks. “The international fall-out from potential border disputes is yet another risk factor for us to consider across our business,” he says. “When countries take sides it can lead to friction and we have to monitor it.”
Last updated on 29 Dec 2009
