The global shipping industry is increasingly vulnerable to geopolitical risks. Political and economic tensions have risen since the January inauguration of US President Donald Trump. Meanwhile, state-based armed conflicts rank as the risk most likely to present a material crisis on a global scale, according to the World Economic Forum’s Global Risk Report 2025 (opens a new window). Fleet owners must prepare for potential escalations, which can delay or cancel the delivery of new vessels, and severely disrupt operations.
Impact on shipbuilding
In early February 2025, the Trump administration imposed a 10% levy on Chinese imports into the US. The decision prompted a series of retaliatory measures from China, including the filing of a dispute complaint (opens a new window) with the World Trade Organisation. These are the first moves in an emerging trade war, in which shipbuilding is likely to play a key role: the new US Trade Representative has already proposed (opens a new window), among other measures, steep US port fees on Chinese-built ships (opens a new window), and on any ship operator that has even a single Chinese-built vessel in its fleet or a single newbuilding on order at a Chinese yard.
If implemented, these measures could have significant consequences for the global shipbuilding industry, with knock-on ramifications for ship operators. Today, China is the pre-eminent force in global shipbuilding. Chinese shipbuilders dominate the market with 53% of the shipyard output in 2024 (opens a new window), according to shipping services provider Clarksons. China has quickly gained market share in the past decades to the detriment of other players such as South Korea and Japan.
This is not the only challenge facing the industry. In addition, escalating tensions between China and Taiwan could complicate trade between non-domestic clients and China-based shipbuilders. Fleet operators may face delays to the delivery of new ships, or even their cancellation. Growing conflict could also increase doubts over the security of already-ordered Chinese vessels.
Risk mitigation recommendations
As reported (opens a new window) in the Financial Times, any such event is likely to come at short notice for the industry. Owing to the long-tail nature of shipbuilding, fleet owners are unlikely to be able to recalibrate supply chains quickly enough to avoid the impact.
Nevertheless, fleet owners should take steps to reduce their exposure to risk. Such measures may include:
Assessing business exposure to shipbuilding risks, including the reliance of future performance and growth projections on Chinese-built vessels, and the potential impact of delayed delivery.
Exploring contingency measures to be pursued in the event of delayed delivery, confiscation, or other risks. For example, businesses may wish to explore potential supplier relationships in countries with lower exposure to risk.
Staying abreast of country-specific sanctions and regulatory changes relevant to global shipping, as well as the cost of complying with any such sanctions.
Educating teams on potential threats, including supply chain issues and evolving import processes, denied parties, and sanctions.
How insurance can help owners to de-risk
Insurance solutions complement general risk management best practice, enabling shipping operators to further reduce their exposure to loss.
As a result of the growing threat to the industry, recent months have seen an uptick in interest for Trade Disruption Insurance (TDI) products worldwide, including from operators of Chinese-built vessels.
TDI typically provides cover for whole or partial deprival of income following events that take place away from the operator’s asset. This can include cover for lost income due to:
Failure to deliver
Inability, or extra cost of, discharging
Expropriation and confiscation
Quarantine, arrest, or detainment
The introduction of new legislation
Third Party Blockage / Border Closure (Political Risk)
Certain insurers have expanded their TDI product offering in recent months, with products backed by artificial intelligence to analyse disruption risks across geographies and supply chains.
Appetite and scope for political risk, meanwhile, wavered in 2024, with many insurers already having increased their aggregate exposures in this region. However, there continues to be some strong security willing to offer effective coverage to help ship-owners de-risk.
Contact our team for further information, or visit our Marine (opens a new window) page for more global shipping insights.
