According to an article published in Business Insurance, Experts are of the opinion that COVID19 lockdown, border restrictions, and supply chain disruptions has heightened the loss prevention and control concerns for ship owners and marine insurers.
Unintended COVID19 Impact – Accumulation Risks
The “extraordinary” reduction in cruise ship activity in the early part of the year has led to growing accumulations of values at ports in Miami and the Bahamas, said Richard Turner, president of the International Union of Marine Insurance.
Mr. Turner was speaking on a Marine Insurance London webinar held last Wednesday in association with London-based insurtech Concirrus Ltd.
“An unintended, unexpected consequence of the virus is an accumulation of values of cruise ships in these locations,” Mr. Turner said.
A glut of oil in storage is another example of potential accumulation risk at ports and warehouses due to the trade downturn brought about by COVID-19, he said.
“Disruptions to supply chains and border restrictions are creating bottlenecks and more complex port procedures for getting cargo through the system,” Mr. Turner said.
Loss Prevention Compromised?
This raises questions on whether loss prevention and loss control will remain at the “optimized levels” seen in the past or whether elements of that will be “compromised,” he said.
“How easy will it be when there is a major casualty for surveyors and salvors to respond if transport systems are in major lockdown?” he said.
Given the extent of the trade downturn, the size of the marine insurance sector will likely contract with “less premium overall,” Mr. Turner said.
COVID19 Digitization Help
Despite the challenges, COVID-19 is spurring greater digitization, which may benefit marine insurance buyers in the long term, panelists said during the webinar.
Digitization will lead to greater accuracy around the behavior of shipping going forward, said Marcus Baker, global head of marine and cargo at Marsh Ltd. in London.
While there’s likely to be a reduction in overall premium, there will also be “a greater degree of accuracy around pricing or appropriateness around pricing” over the next six to 12 months as people become more digital savvy, Mr. Baker said.
Insurers Adapting Responses
Philip Graham, head of marine, Chaucer Syndicates Ltd., said insurers are reacting to customers’ needs and adapting policies and premiums to reflect the changes in their exposures.
“In a lot of cases we are offering layup returns to the cruise industry right now, but it’s actually quite a blunt tool when they start re-engaging back into a trading environment,” Mr. Graham said.
A usage-based policy that adapts to their changing trade requirements now and in the future would be more efficient, he said.
“We’ve been advocating the notion of elastic policies for a while,” said Andrew Yeoman, CEO of Concirrus Ltd. “The biggest challenge is finding a progressive broker to take those into the market,” he said.
Changing Nature of Risks and Premiums
The industry needs to understand the nature of the risk has changed and digitalization is now “inevitable,” Mr. Yeoman said.
When it comes to premium reduction, much will depend on whether there is sufficient insurance capital in the market, said Nick Shaw, CEO of the International Group of P&I Clubs.
“There has been rumor that there has been some withdrawal of capacity to pay claims in other areas,” he said.
It will be interesting to see “whether there is in fact a tightening of premiums, or whether even though there may be a reduction in the number of risks, we may see premiums grow in some areas,” Mr. Shaw said.
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Source: Business Insurance