Global insurer Aon, which launched a new bunker fuel insurance product last week, has said the product was developed to meet the expected market volatility emanating from IMO2020.
Aon Comments
Recognising that buyers lit carying amounts of fuel, the product is designed to be “as flexible as possible,” the company told Ship & Bunker,
“This includes the low volume entry point and flexible term plus the ability to pay premium through monthly instalments,” they added.
Since “the cost of fuel has increased significantly, not just through the switch to lower sulphur fuel, but also because the oil price has increased over the past 12 months”, Aon believes that “firms [will] want to protect themselves against further fluctuation”.
“This product can assist with that strategy,” the company said.
Hedging tools
Hedging tools such as the Cap product offered by Aon are nothing new, but uptake has been limited.
However, with a greater than usual level of uncertainty in the market due the the ongoing coronavirus pandemic along with rapidly rising oil prices, there could be an uptick in interest.
Paul Millar comments
“If there is a compelling belief that prices will grow significantly I can see this gaining traction,” said Paul Millar, head of global credit at Bunker Credit Management.
Pushing against that is the price of the cover which becomes an added layer of cost to what may become, for fuel, an already inflated budget.
Contractual obligation
Other factors, such as contractual obligation, can push shipping firms towards buying in cover but it remains to be seen if fuel price insurance will establish itself in the open market or stand still as a niche offering.
For more information read our article Aon Launches Fuel Price Insurance To Help Shipping Risks.
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Source: Ship & Bunker
