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Storm in the Port: COVID-19 Forced the Marine Cargo Market to Change Course

The coronavirus pandemic presented the marine cargo insurance industry with significant challenges. When the distribution of the COVID-19 vaccinations commences, the market will be in the spotlight. 
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storm in the port: covid-19 forced the marine cargo market to change course

Since the world ground to a near-halt with the onset of the coronavirus pandemic, the marine cargo insurance industry has been presented with significant challenges that may leave a long-term mark.

“While shipping has been somewhat impacted, the real impact on the marine cargo industry occurs once the containers hit the port," says Cran Fraser, NFP practice leader for energy and marine. “Products are being delayed because the labor force has been impacted by the coronavirus, or because the client can't pick their product up because they have no place to use it."

“Ports are running out of space to store product," he adds. “And all these logistical challenges are generally not covered under most marine cargo policies."

The coronavirus pandemic has “absolutely changed the marine cargo market, down to how we're brokering it and the terms and conditions on policies," Fraser says. “We're now seeing specific coronavirus exclusions that are being put on marine cargo policies."

Marine cargo will find itself in the spotlight as developments surrounding COVID-19 vaccinations move from discovery to distribution.

“A new product has been released out of Lloyd's of London, Syndicate 1796, which has been developed to cover the transportation of COVID-19 vaccinations," Fraser says. “It's an all-risk policy that covers transportation around the world."

The new public-private “syndicate in a box" was developed by InsurTech firm and Lloyd's Lab alumni Parsyl, in close partnership with managing agent Ascot, in cooperation with AXA XL; McGill and Partners; and Gavi, the Vaccine Alliance, according to Reinsurance News.

As it started writing business in October, Syndicate 1796, the backbone of Lloyd's Global Health Risk Facility, will include all-risk cargo coverage for transit and storage risks on all global health products related to the virus, and any other infectious disease control and prevention programs.

Marine cargo insurance is also preparing for strong currents beyond the pandemic. “What's the next black swan event?" Fraser asks. “And how does the industry respond to those types of earth-shattering events that shake up the world's economies?"

The solution “may be a joint reinsurance market between governments, allowing the insurance market to put together a product and then reinsure it back into a government-funded backstop," he says. “It would be similar to the National Flood Insurance Program or some windstorm programs in certain states in the U.S."

Independent agents should also note that “the required underwriting information has gotten much more onerous," Fraser says. “Our clients have been very used to providing certain standards of underwriting data, but the market is now requiring that data to be much more precise, and that is taking time to get from the client."

“Expectations have to be managed with clients; 2020 is a whole new level," he adds. “Plan early and execute precisely. Agents need the proper lead time to get a proper product."

AnneMarie McPherson is IA news editor. 

This article was published in the October 2020 issue of Independent Agent magazine.