By: Estelle Bond, Hollard Insure Marine
Marine was a class of insurance in trouble well before COVID-19 made its appearance.
The Marine insurance market has been soft and largely unprofitable for the past two decades.
So much so that even the traditional home of Marine insurance, Lloyd’s of London, has had to review the business plans of numerous Syndicates as premium rates were not keeping pace with claims inflation.
Global economic growth has generally been poor and, natural and man-made catastrophes such as the port explosions in Tianjin and Beirut, have added to the woes of the marine industry. These events have diluted growth gains anticipated by new technological innovations in shipbuilding design and propulsion – innovations meant to address important environmental challenges in ocean trade. Innovations such as mega containerships, autonomous ships and digital ecosystems extended hope of solving for operational efficiency and reducing costs. However, these initiatives have stalled with the onset of the global pandemic.
Is the global pandemic then yet another threat to growth in the Marine insurance sector, or can it present an opportunity for a better future?
In addition to supply chain disruptions, Covid-19 brought about other challenges. The health and safety of vessels’ crew and passengers, issues in certifying vessels, restrictions on port calls, mobility restrictions on surveyors attending to major claims, availability of spare parts and spikes in crimes such as theft of personal protective equipment are but a few of these. The pandemic brought about cancellation of sales orders and shipping contracts, late delivery of goods as well as spoilage.
In the pleasure craft sector, lockdown restrictions gave rise to challenges in issuing certificates of fitness for vessels, requests for premium reductions for vessels not in use and the theft of outboard motors and other equipment.
Reduced economic activity leads to declining trade which will inevitably mean lower premium income for insurers.
New risks emerging from the lockdown scenario include the aggregation of insured valuesresulting from lockdowns at various points throughout the supply chain.
Reinsurers hastened to clarify intentions of cover relative to communicable diseases and most, if not all, marine policies were endorsed accordingly.
The current pandemic may be one of the biggest disruptors of our time as it presents insurers with real exposure to risk and a threat to growth and profitability in the Marine insurance sector. However, it is also an opportunity for change in a market that has been doing much of the same for the past 100 years.
On the one hand the pandemic decelerated certain key technological innovations referenced earlier but on the other hand, it accelerated other technological platforms that enabled the global workforce to be impressively productive from home during lockdown thereby allowing for some growth across industries.
So impressive was this feat that it constitutes a paradigm shift in ways of working not contemplated in a pre-pandemic world.
For the specialist marine sector digital platforms enable a wider reach across borders to tap into specialist expertise on contemporary issues. Hollard recently hosted a marine webinar on port accumulations featuring international guest speakers and attendees from no fewer than 7 countries. For the first time in its history, IUMI(International Union of Marine Insurance ) itself hosted an international virtual conference in September attracting hordes of delegates who benefited from the key messaging. This level of reach, engagement and richness of experience would have been unlikely in a pre-pandemic world using conventional methods of engagement.
I believe there is scope for the Marine insurance sector globally to come up with new, innovative products and solutions to help policyholders manage risk. Solutions that, instead of having them reeling from the punches of unforeseen calamities, have policyholders rolling with them.
Leveraging technology such a satellite technology and GPS to manage current and emerging risks (such as ever-increasing port accumulations) will be key.
The cost of Marine insurance is going up; it has to, if only to harden up the sector and make it viable once more. That’s a bitter pill for policyholders to swallow, especially in these difficult times. But broadening the scope of risk management solutions will add value for them – and put them in a better position to weather the next global calamity. That will be good for us all.
This article appeared in the December 2020 edition of COVER magazine. Download the article as it appeared in the magazine here.