Navigating Global Fault Lines:

A Norwegian Perspective on Geopolitical Risk and Insurance in Maritime and Energy Sectors

Introduction

For decades, the international (re)insurance market operated under the assumption that global trade would remain inherently frictionless. Geopolitics was largely treated as a peripheral concern, a remote force majeure scenario rather than a daily operational hurdle. Today, that paradigm is left. The global economy has entered an era defined by fragmentation, expanding sanctions regimes, and the proliferation of traditional and hybrid warfare.

Sitting at the geopolitical crossroads of this new reality is Norway. While a small nation by population, Norway’s strategic footprint is large. It has one of the world’s largest and most advanced merchant fleets and, following the geopolitical upheaval of 2022, has cemented its position as one of Europe’s energy guarantors. For example, Norway provides roughly 30% of the natural gas consumed in the EU.¹Read more on the statistics here: Exports of Norwegian oil and gas – Norwegianpetroleum.no This dual role, as a maritime powerhouse and an energy anchor, places Norwegian stakeholders and their legal and insurance advisors, at the centre global disruptions.

For legal practitioners advising shipowners, energy operators, and insurers, geopolitics is no longer a theoretical risk. It is the core driver of underwriting decisions, compliance frameworks, and contract drafting. Standard insurance clauses and warranties are proving inadequate against the realities of state-sponsored sabotage, complex price-cap coalitions, and the weaponization of critical infrastructure.

Building on last year’s analysis of cyber risk and insurance, this article dives into different aspects on how the Norwegian market is tackling risks across the global supply chain. We will examine the volatile frontlines of international shipping, the “gray zone” threats to Europe’s subsea energy infrastructure, and the emerging conflicts playing out in the High North.

PART 1: The Frontlines of Shipping – War Risks, Sanctions, and the “Shadow Fleet”

The contemporary maritime risk landscape is arguably more complex than at any point since the Second World War. We have seen many geopolitical conflicts rise in the later years, hitting critical shipping chokepoints. Therefore, the commercial insurance market recently has been forced into recalibrations.

This is very evident in the Persian Gulf, Red Sea and Gulf of Aden. Following sustained risks for commercial vessels by military strikes, war risk premiums have experienced historic volatility. At its peak, premiums for vessels transiting in conflict zones has surged to as much as 1% of a vessel’s total hull value for a single week.²See for example Lloyd’s List’s report: The Daily View: Eternity C and Magic Seas: shipping and marine insurance in shock :: Lloyd’s List This amounts to hundreds of thousands of dollars in additional costs per voyage. This actuarial volatility has forced major shipping lines to reroute around the Cape of Good Hope, fundamentally disrupting global supply chains and significantly altering risk profiles for hull, machinery, and cargo covers.

The Norwegian Mutual Buffer

While international commercial markets often react to geopolitical shocks with immediate withdrawal of capacity followed by premium spikes as more restrictive cover, the Norwegian maritime sector benefits from a unique structural buffer. This is called the mutual insurance model. Den Norske Krigsforsikring for Skib (The Norwegian Shipowners’ Mutual War Risks Insurance Association, or DNK) stands as the world’s largest mutual war risk insurance association.

Founded in 1935 in response to rising global tensions, DNK operates on a fundamentally different philosophy than commercial underwriters. Rather than focusing solely on premium generation, the mutual model prioritizes continuous cover and operational resilience for its members. For example, when the commercial market withdrew from the Black Sea following the outbreak of the war in Ukraine, or when tensions spiked in the Strait of Hormuz, DNK maintained critical coverage for Norwegian-linked tonnage.³DNK’s anual reports can be read here: Den Norske Krigsforsikring for Skib

Crucially, the Norwegian approach transcends traditional risk transfer. DNK functions as a central intelligence hub, operating the Intelligence and Operations Centre (IOC) to provide members with real-time threat assessments, automated breach detection, and precise AIS location monitoring. Furthermore, through the establishment of the Norwegian Shipowners’ Emergency Response Centre, the Norwegian cluster treats physical war risks and cyber threats as a unified geopolitical exposure. This centre is a collaboration between DNK, the Norwegian Shipowners’ Association, and the maritime cybersecurity center Norma Cyber. For international reinsurers, this integrated, intelligence-led approach makes the Norwegian portfolio highly attractive, as loss prevention is embedded directly into the underwriting relationship.

The Compliance Minefield and the “Shadow Fleet”

However, physical attacks are only one facet of the geopolitical landscape. The proliferation of international sanctions, particularly the Western price-cap coalition targeting Russian oil exports, has birthed a massive “shadow fleet”. As of late 2025, the global shadow fleet consists of approximately 3,200 to 3,300 vessels, representing around 18.5% of the global oil tanker capacity.⁴More insight on the numbers can be found here: The Rise of the Shadow Fleet: A November 2025 Overview It is estimated that billions of dollars have been invested in acquiring older, often poorly maintained vessels to transport sanctioned cargoes outside the mainstream financial and insurance systems.

For legitimate shipping operators and top-tier Protection and Indemnity (P&I) clubs this development represents an unprecedented compliance issue. Shadow fleet vessels routinely engage in deceptive shipping practices, such as AIS spoofing, dark ship-to-ship (STS) transfers, and using complex, obscured ownership structures to mask the origin of their cargo.

From a legal and insurance perspective, the existence of this parallel fleet introduces severe contagion risks. If a legitimately insured vessel inadvertently interacts with a sanctioned shadow vessel – for instance, through a collision in congested waters, a salvage operation, or an unwitting STS transfer – the regulatory and financial consequences can be catastrophic. P&I clubs are strictly bound by EU, UK and Norwegian sanctions regulations, meaning that any insurance cover related to sanctioned activities can be immediately voided, leaving shipowners exposed.

Consequently, the role of legal counsel in the marine insurance space has shifted heavily toward sanctions compliance and counterparty due diligence. Drafting watertight sanctions warranties, establishing rigorous “know your customer” (KYC) protocols, and ensuring strict adherence to the latest guidance from authorities are no longer mere administrative tasks. They are existential requirements for maintaining insurance cover. The industry is currently witnessing a rapid evolution in policy wordings, as underwriters and lawyers work collaboratively to design clauses that protect legitimate operators while strictly excluding any exposure to the shadow economy.

PART 2: Securing Europe’s Energy – Subsea Infrastructure and the “Gray Zone”

Following the dramatic reduction in Russian pipeline gas deliveries in 2022, Norway seamlessly transitioned into the role of Europe’s primary energy supplier. Today, the Norwegian continental shelf is the heart of European energy security. However, this heightened strategic importance has transformed Norway’s network of offshore oil and gas platforms, offshore wind farms, and nearly 9,000 kilometers of subsea gas pipelines into prime geopolitical targets.

The threat is no longer theoretical. The unprecedented sabotage of the Nord Stream 1 and 2 pipelines in the Baltic Sea in 2022 served as a stark wake-up call. The severing of the Svalbard subsea fiber-optic cable in early 2022, the damage to the Balticconnector pipeline by a Chinese-Russian vessel in 2023, and the more recent severing of the C-Lion1 cable between Finland and Germany demonstrate a pattern of interference with critical underwater infrastructure.

The Hybrid Warfare Conundrum

For the (re)insurance sector, these events introduce a challenge. The weaponization of the “gray zone.” Gray zone operations, or hybrid warfare, involve aggressive state or state-sponsored actions that deliberately fall below the threshold of conventional armed conflict. They are designed to be deniable, often utilizing civilian vessels, cyber-attacks, or untraceable underwater drones to execute sabotage.

As discussed in last year’s Review regarding cyber risks, hybrid warfare fundamentally blurs the lines of traditional insurance policies. The central legal and actuarial battleground is the “War Risk Exclusion Clause” found in standard all-risk property and energy policies. Historically developed in the 18th century, these exclusions were designed to protect commercial insurers from the ruinous accumulation of losses associated with formal declarations of war.

Today, state actors rarely declare war. When subsea infrastructure is mysteriously ruptured, a highly complex coverage dispute can arises. Was the damage an act of vandalism, terrorism, or a warlike act orchestrated by a sovereign state?

The ongoing €400 million lawsuit in European courts between the operators of the Nord Stream pipelines and their insurers demonstrates.⁵Read more here: Nord Stream sues insurers in London over 2022 pipeline blasts | Reuters The all-risk insurers have reportedly declined the claim, arguing that the explosions constitute a warlike act and therefore fall squarely within the war exclusion. Conversely, war risk insurers often require explicit proof of state involvement or a declared conflict to trigger their specific cover. This leaves energy operators facing the prospect of falling into a coverage gap between all-risk and war risk policies.

Adapting Offshore Energy Wordings

For legal advisors and insurance brokers representing Norwegian energy companies and subsea contractors, addressing this ambiguity is a top priority. Standard offshore energy wordings (such as the traditional WELCAR forms) are being scrutinized. Definitions of terms like “sabotage,” “terrorism,” “malicious damage,” and “warlike operations” are being stress-tested against modern hybrid threat scenarios.

Furthermore, as Norway pioneers the development of floating offshore wind, characterized by novel technology and massive capital expenditure, securing international reinsurance capacity requires absolute clarity on risk allocation. Insurers are demanding comprehensive security risk assessments from operators, including mapping vulnerabilities to both physical subsea interference and concurrent cyber-attacks. Bridging the gap between traditional energy insurance and bespoke political violence or war risk covers is now a critical component of structuring project finance for offshore infrastructure.

PART 3: The High North – The Northern Sea Route and Environmental Roulette

The geopolitical recalibration has also cast a shadow over the Arctic. With several of the main trading routes are compromised by disruptions, the Northern Sea Route (NSR) running along Russia’s Siberian coast offers a highly attractive, significantly shorter transit corridor between Northern Europe and Asia in the future.

A combination of factors such as thick sea ice for most of the year, harsh weather and sea conditions, and long emergency response times continues to present the most significant and longstanding challenges for this alternative sea route. More recently, the NSR’s geopolitical risk profile has come under renewed scrutiny. Following the collapse of the Arctic Council’s cooperative framework and the imposition of Western sanctions on Russia, the risk landscape in the High North has shifted markedly. Leading international shipping companies that previously sought to pioneer NSR operations have now largely withdrawn, driven by ESG commitments and sanctions compliance, leaving the route with limited participation from top-tier operators.

The Dark Fleet Moves North

Into this vacuum has sailed the “shadow fleet”. According to recent data, 2025 saw approximately 100 sanctioned vessels navigate the NSR, constituting nearly a third of all cargo traffic on the route.⁶Read more here: Nord Stream sues insurers in London over 2022 pipeline blasts | Reuters This shadow fleet comprises aging oil tankers and cargo ships that frequently sail under flags of convenience, deactivate their Automatic Identification Systems (AIS) to hide their locations, and lack the mandatory ice-class certifications and adherence to the Polar Code, essential for safe Arctic navigation.

For the marine insurance industry, this represents a game of environmental roulette. Several of these vessels operate without standard Protection & Indemnity (P&I) cover from International Group (IG) clubs. Should a catastrophic incident occur, a highly plausible scenario given the treacherous ice conditions, extreme weather, and the vessels’ substandard maintenance, there is virtually no financial mechanism in place to fund a multi-billion-dollar cleanup operation. Furthermore, the geopolitical freeze has severely degraded cross-border Search and Rescue (SAR) cooperation in the Barents Sea, compounding the risks.

Regulatory Pushback and Compliance Imperatives

The United Nations Convention on the Law of the Sea gives coastal states limited authority to enforce measures against foreign vessels before pollution has actually occurred, as it prioritises the right of innocent passage in territorial waters and the Exclusive Economic Zone. However, the presence of unregulated and uninsured vessels in fragile Arctic waters has prompted a strong regulatory response from Nordic countries. Sweden and Finland have recently urged the European Union to introduce a comprehensive ban on European companies providing maritime services to vessels transporting Russian energy through the Arctic. At the same time, Norwegian authorities are reviewing compliance and oversight arrangements in the maritime insurance sector to prevent intermediaries from facilitating questionable coverage.

For global (re)insurers, developments in the High North highlight the need for dynamic geographic exclusions and strict voyage warranties. Underwriters must ensure that insured vessels are not inadvertently drawn into search and rescue operations or salvage claims involving sanctioned shadow vessels in the Arctic, as providing such assistance could potentially trigger secondary sanctions. The Arctic is no longer only a demanding navigational environment. It is also a high stakes compliance frontier, particularly for the (re)insurance sector.

Conclusion

The shifts in global geopolitics over the past few years have irreversibly altered the international (re)insurance landscape. This is demonstrated by the Norwegian experience. From safeguarding vital subsea energy arteries to navigating the treacherous compliance waters of global shipping and the Arctic, traditional risk transfer models are being stretched.

The scale of modern geopolitical risk highlights a reality. Private capital alone cannot absorb the financial shocks of state-sponsored hybrid warfare or the systemic disruption of global shipping lanes. Just as the industry developed public-private pools for terrorism risk following the 9/11 attacks (such as Pool Re in the UK), there is a growing need for dialogue between national governments and the insurance sector. This to address the uninsurable extremes of hybrid and gray zone conflicts.

In the interim, the burden falls on the industry’s legal and strategic advisors. At Kvale, our experience acting for stakeholders across the maritime, energy, and transport sectors reinforces a clear lesson. Complacency is the greatest risk of all. Standardized policies must be actively interrogated and tailored. War risk exclusions, sanctions warranties, and hybrid threat definitions must be drafted with forensic precision, reflecting the specific geopolitical exposures of each client.

Ultimately, navigating these lines requires more than just robust capital. It demands deep sector expertise, geopolitical fluency, and a proactive, integrated approach to legal and actuarial risk. Moving forward, the resilience of the (re)insurance market will depend on its ability to evolve alongside the threats it seeks to mitigate.