The maritime industry is undoubtedly the backbone of global trade, connecting markets and ensuring the flow of goods worldwide. However, catastrophic natural events such as earthquakes, tsunamis, and hurricanes represent an undeniable challenge for insurers and for our society. While these disasters are devastating, they are well studied within the insurance sector. In recent years, however, a quieter yet increasingly significant threat has emerged: the so-called secondary hazards.

While primary hazards, such as extreme hurricanes and earthquakes, are clearly responsible for significant volatility in loss severity, secondary hazards are driving the trend toward increasing insured losses. Research clearly indicates that climate change has an impact—sometimes a substantial one—on the frequency and severity of these natural phenomena.

Secondary hazards refer to localized natural risks such as flash floods, wildfires, hailstorms, and severe storms with tornadoes. These hazards are no longer rare or isolated events. Their increasing frequency and severity have become an urgent concern for the insurance industry, and marine insurance is no exception. These risks, fueled by the intensification of climate change, require insurers to rethink traditional underwriting models.

Over the past decade, we have witnessed a cascade of extreme events that illustrate the growing impact of secondary hazards. Wildfires in California (2018), Australia (2019), and Greece (2018–2023) have caused significant human and financial losses. Severe storms in the United States have reached annual loss levels comparable to those of a major hurricane, and flash floods in Germany and Spain (2023–2024) have affected communities and industries alike. These events have generated billions of dollars in infrastructure damage, disrupted supply chains, and prolonged business interruptions.

Latin America, often identified as one of the regions most vulnerable to natural disasters, provides a clear example of the challenges posed by secondary hazards. In 2023, droughts in Panama significantly disrupted operations at the Panama Canal, reducing the number of daily vessel transits from 38 to 28. This bottleneck not only delayed global maritime transport schedules but also generated an estimated loss of USD 500 million in revenue for the canal—a striking reminder of how localized environmental changes can ripple through global trade.

In 2021, the Paraná River in South America, a critical commercial artery in the La Plata Basin, reached its lowest level in 77 years, halting barge traffic and affecting the economies of Uruguay, Argentina, and Brazil. By contrast, just three years later, southern Brazil faced catastrophic flooding in Rio Grande do Sul, displacing nearly 580,000 people and causing severe economic damage.

The challenging aspect of secondary hazards lies in their unpredictability, as they can occur virtually anywhere, such as flash floods. For many of these secondary hazards, like floods, the insurance gap remains alarmingly high, even in industrialized countries, and is even more pronounced in emerging economies. These events often occur in areas unaccustomed to such risks, leaving insurers with limited data and experience to manage or model them effectively.

What was once considered marginal, secondary hazards have become a central element in the emerging risk landscape of marine insurance. Ignoring their rise means risking falling behind in an era of rapid climate and environmental change. For the insurance industry, adopting proactive strategies to understand, mitigate, and underwrite these emerging risks is no longer an option—it is an imperative.