The dark fleet of insurance risks
Global credit rating agency Morningstar DBRS recently observed how geopolitical developments in Venezuela have brought renewed focus to tail risks for the global insurance sector, particularly across specialty property and casualty (P&C) lines with exposure to marine, aviation and trade credit in the Caribbean region.
The commentary pointed out that while Venezuela has long been a marginal market for most international insurers, with limited direct exposure, the current situation matters because it could disrupt regional transport corridors and trade routes covered by global insurers.
The report identified marine, aviation, trade credit and political risk as the most affected lines.
It said marine insurers faced heightened war-risk exposure and accumulation risk due to concentrated shipping routes near Venezuelan waters. Sanctions and compliance challenges further complicate underwriting, particularly for vessels operating under opaque ownership structures.
Aviation coverage was also cited as being under strain as disrupted airspace and regulatory uncertainty drive up premiums and reduce capacity. Trade credit and political risk insurers are contending with payment defaults and contract frustrations linked to Venezuela’s economic volatility.
Sanctions enforcement remains a critical concern. The report points to the emergence of a “dark fleet” of vessels, ships with disabled tracking systems or unclear ownership, as a growing operational risk.
The report said the use of such practices increased the likelihood of sanction breaches, creating potential liabilities for insurers and reinsurers.
Uncertainty around the applicability of sanctions clauses could lead to delayed claim settlements and reserve management challenges, adding pressure to balance sheets if geopolitical tensions escalate.
Morningstar DBRS said these developments had implications for Caribbean insurance markets broadly, including hubs that provide specialty coverage. Rising premiums, tighter terms and reduced capacity in marine and aviation segments are expected as insurers recalibrate risk appetites.
The report emphasises the need for disciplined underwriting and enhanced compliance measures. Diversification of geographic exposures, strengthened reinsurance arrangements and rigorous sanction controls are cited as essential strategies to mitigate tail risks.
• For more on the Morningstar DBRS commentary, see Related Media
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