The International Union of Marine Insurance has said the industry is committed to working with its clients to manage the impact of the Covid-19 pandemic.
However, it has warned attempts by national regulators to retrospectively add pandemic cover to policies would be “ruinous”.
The organisation has issued a guidance paper to its members which spells out its belief that the market can play a role in ensuring the solvency of its clients with prompt payments of claims.
It said: “IUMI is fully aware that the virus is first and foremost a human tragedy putting the health and lives of many people – not only the elderly and infirm – worldwide in serious danger. The health, wellbeing and protection of human life is paramount and, of course, takes precedence over anything.”
The paper stated: “It is still too early to assess the mid and long-term macroeconomic impact of the COVID-19 disease. It depends entirely on the further development and spread of the virus over the coming weeks and months. A range of outcomes are currently being modelled based on different scenarios: Estimates for a potential shrinkage of global GDP vary between about 2 percent if the virus is fought successfully in spring 2020 or up to 20 percent if the virus continues to spread until autumn 2020.”
For the marine sector IUMI said the pandemic has impacted the sector in a number of ways including:
- Issues related to the safety and health of vessel crews and passengers.
- Disruptions in the supply chain due to border restrictions, additional checks and testing or actual COVID-19 cases reported on vessels, in port areas or warehouse locations.
- Extension of certificate due to restrictions on the work of classification societies.
- Ongoing statutory class work and vessel inspections cannot, to a large degree, be carried
- Complications with port calls for vessels by severe restrictions which may cause additional administrative burden and potential delays.
For marine insurers IUMI stated: “The marine insurance industry is a service industry. Marine insurers are fully committed to supporting their clients with their expertise and experience in these exceptional times. They are endeavouring to be as flexible as possible to help their clients address the ongoing challenges.
“COVID-19 is likely to impact the business of marine cargo, hull and offshore energy insurance in both the short and longer term. In the short-term, COVID-19 related client procedures and specific regulation has an increased claims potential that marine insurers have to deal with. Further, in the mid and long-term, the macroeconomic impacts and lessons-learned may cause adaptation in the marine insurance industry; less business and less premium volume may be a consequence; there may also be requests for new or adapted wordings and coverage.”
It also warned legislators’ efforts to seek to backdate pandemic covers in policies could have a profound effect if successful.
“in some countries such as the US and the UK, policy makers have seemingly focused on business interruption claims and the fact that many of those insurance policies either contain pandemic exclusions and/or have not been specifically extended to provide COVID-19 related cover,” it said. “There are some initial calls for mandatory retroactive cover despite specific exclusions. Such an approach would cause severe solvency issues and be potentially ruinous to the insurance market.”
IUMI said from its standpoint in spite of the COVID-19 crisis, the marine insurance industry continues to fulfil its contractual obligations by paying insured claims promptly and focusing on their clients’ needs and demands specifically related to COVID-19.
“The marine insurance industry will support its clients as best as possible in the current situation with its technical and claims expertise and its long-lasting experience in managing arising claims, overall business challenges and uncertainties,” it added. “The range of coverage and wordings will continue to be negotiated between insurers and clients on a case-by-case basis so that policies are adapted – as far as is possible – to cover their clients’ exposure caused by pandemic risks.”