Arctic shipping routes can cut sailing distances by up to 40 percent between Asia and Europe or North America, but high insurance costs restrict them to niche cargo, reports Singapore's Insurance Asia.

A new Coface analysis stated that Arctic routes reduce distances by 20 to 40 percent; however, insurers apply a 40 percent surcharge on premiums due to risks from ice, remoteness, and difficult operating conditions. In contrast, the Suez route carried a 0.07 percent risk premium on vessel value before the Red Sea attacks.

The cost gap means Arctic shipping is only competitive in limited markets. Coface indicated that bulk cargo is most suited, with liquid bulk potentially saving 45 to 50 percent on transport costs, while dry bulk may also benefit, albeit to a lesser extent.

Insurers note that Arctic voyages carry a different risk profile, often requiring icebreaker escort or reinforced hulls. Sea ice remains variable and unpredictable despite overall declines in coverage.

The report also highlighted environmental risks, including oil spills, black carbon emissions, and noise pollution in a fragile region, underscoring why Arctic shipping remains a niche rather than a mainstream trade option.