As the $5 billion effort to modernize the Panama Canal nears completion, the marine insurance industry already is grappling with the risks posed by increased vessel size and risk concentration.

While originally intended to be finished for the waterway's 100th anniversary in August, construction delays and a protracted legal dispute over cost overruns have slowed the expansion, which is now 78% complete, according to the Panama Canal Authority.

When finished, now projected for early 2016, the widened canal will enable larger vessels to transit the isthmus. Whereas the Panama Canal's current configuration can accommodate container vessels with a maximum capacity of 4,400 20-foot equivalent units, the widened canal will be able to handle container ships of up to 12,600 TEUs.

“This is a big development for the marine industry because the amount of cargo moving through this trade route is going effectively double,” said Rahul Khanna, London-based global head of marine risk consulting for Allianz Global Corporate & Specialty, a unit of Allianz S.E.

Markus Wähler, Munich-based marine consultant at Munich Reinsurance Co., said the expansion became necessary as ocean shipping companies began commissioning ever-larger ships in search of economies of scale in recent years.

“There's a trend toward gigantism in container ships,” Mr. Wähler said.

However, Mr. Khanna said, even the widened the Panama Canal will not be able to accommodate the biggest vessels currently working trade routes.

“The biggest ship that will be able to pass though the widened canal will be about 12,000 TEUs, but there are already 18,000 TEUs ships in operation,” he said.

Nonetheless, the expansion will accelerate the trend of larger ships, said Peter Townsend, London-based head of London marine and corporate solutions at Swiss Re Ltd. and chairman of Joint Hull Committee for Lloyd's Market Association.

“The Panama Canal expansion will almost certainly result in a larger world fleet,” Mr. Townsend said. “The margins are so slim now shipping lines can only afford to operate the most efficient ships.”

Mr. Khanna said risk concentration is a bigger concern as vessel size increases.

“The bigger the vessel, the higher the risk it poses just because of the amount of cargo and value at risk,” he said. “A single ship can now present a $400 million to $500 million risk.”

Mr. Townsend agreed.

“We are seeing the frequency of claims falling, but the severity increasing,” he said. “The cost of causality grows exponentially to the size of the ship. So what would be a reasonable claim for a smaller ship can become hugely expensive on a larger ship.”

Larger ships also present challenges when salvage is necessary, said Marcus Baker, London-based chairman of Marsh Ltd., global marine practice

“The concern the insurance industry has is the removal of wreck issue,” Mr. Baker said.

Mr. Townsend said the cost of salvaging the grounded cruise ship Costa Concordia off the coast of Italy highlighted the danger of grounding.

“The Italian government insisted that the Concordia be taken away in one piece when the industry practice is to do it in bite-sized chunks,” Mr. Townsend said. “That significantly increased the cost of salvage it. It has cost $1.4 billion to remove a ship valued at $500 million.”

Yet, as the trend of larger ships looks to continue, Panama is not the only location modernizing its infrastructure to accommodate them.

In August, the government of Egypt said it would spend $8 billion to expand and deepen the Suez Canal.

In July, the Nicaraguan government and a Chinese company announced plans to build a 173-mile canal linking the Atlantic and the Pacific oceans through Lake Nicaragua.—