The presence of Somali pirates in the waters of the Arabian Sea imposes a threat of time penalty, caution related financial expenditure, and necessitates the need for induction of armed personnel with physical security equipment onboard the ships. This increases the costs and leads to legal problems in case civilians are killed. This aspect can be insured against by the Indian insurance sector for the cruisers and the shipping lines which transit this area. With enhanced Suez Canal tariff charges, it becomes more profitable for Indian insurance companies to provide a combination of insurance services covering accident-based blockage of the Suez Canal, piracy-related threats in the Arabian Sea, or the unforeseen need for circumnavigation around the Cape of Good Hope during the denial of the Suez Canal because of any reasons like war disaster etc.

It is important to note that when the stakes were low; the charges too were less. Now with the enhanced tariff rates; it becomes all the more important for the shipping lines to pay more attention to safeguarding their cargos, ensuring prompt delivery, mitigating piracy threats so that they can concentrate on their core job of moving goods between various places on the globe. This will entail paying a higher insurance premium which will increase the top lines of the insurance companies.

This in turn will intrinsically bring in greater opportunities for the Indian business industry as it offers customized PRI policies, as also, create optional policies, when taking spot decisions to circumvent the Cape of Good Hope to avoid delays from Suez Canal blockage or accidents.

Moreover, this is also the realm where the Indian software industry can get into to provide better operations research-based solutions and suggest ways to increase the throughput of the traffic through the Suez Canal. Consequently, once the transit time reduces, it will also reduce the cost of movement of goods for sale between Asia and Europe.

It can be seen that, now with the cost of shipping going up for the ultimate consumers; all Indian exporters need to rethink about India’s role in terms of offering customized political risk insurance, maritime insurance, getting more favourable terms for Indian cargo ships to cross the Suez Canal and provide operation research based software solutions supported by artificial intelligence to reduce the throughput cost of cargo ships. This will offset the tariff hike by SCA and provide a win-win solution for all stakeholders.

References

1. https://www.suezcanal.gov.eg/English/About/SuezCanal/Pages/CanalCharacteristics.aspx

2. https://www.suezcanal.gov.eg/English/MediaCenter/Brochures/New%20Suez%20Canal.pdf

3. https://www.mfat.govt.nz/en/trade/mfat-market-reports/market-reports-middle-east/the-importance-of-the-suez-canal-to-global-trade-18-april-2021/

4. https://www.hellenicshippingnews.com/sczone-head-13-of-world-trade-passes-through-suez-canal/

5.https://www.suezcanal.gov.eg/English/About/SuezCanal/Pages/AboutSuezCanal.aspx

6. https://www.suezcanal.gov.eg/English/About/SuezCanal/Pages/CanalHistory.aspx

7. https://www.indiatoday.in/business/story/explained-how-much-did-suez-canal-blockage-cost-world-trade-1785062-2021-03-30

8. https://www.bbc.com/news/business-56559073

9. https://www.suezcanal.gov.eg/English/MediaCenter/News/Pages/navigation_04-11-2021.aspx

10. https://www.suezcanal.gov.eg/English/Navigation/Pages/NavigationStatistics.aspx

11. https://www.suezcanal.gov.eg/English/Navigation/Pages/NavigationStatistics.aspx

12. https://www.wsj.com/articles/after-the-suez-canal-jam-hundreds-of-ships-await-their-turn-11617118903

13. https://www.suezcanal.gov.eg/English/Pages/FAQ.aspx