Charterers Club, part of MECO Group, has updated its members on how it has been reacting to the Covid-19 pandemic.
It noted that the start to 2020 had given everyone some unique challenges to deal with. The Club said that it had been monitoring Covid-19 from early February. It closed its Shanghai office in the middle of February.
A disaster recovery test in London to look at vulnerabilities led to full closure the next day; all staff have been working from home since March 20th, with the Dubai office closing a week later.
The Shanghai office reopened in the middle of April and Dubai reopened in the first week of May; both with soft openings so only half of the staff will be working in the office at any one time. Charterers Club said that this was likely to be the case for the foreseeable future and would probably be how London would re-open in due course.
The Club said that all of our systems were online enabling staff to work effectively when out of the office. The various teams meet virtually over the internet. “Efficiency is probably improved as most people’s commute is now only three minutes, from bedroom to laptop, with a quick pit stop for a coffee on the way”, the Club said.
However, Charterers Club emphasized that this was not to say that working life was better. It said that person-to person contact was vital to its business. “It is how colleagues bond, solve problems, get to know brokers, reinsurers, clients, and ultimately stay sane outside of what is now a very small bubble”, the Club said, adding that it was also how it developed new, and retained existing, clients for the long term.
Just after Charterers shut the London office, many other countries set in place their own arrangements to stop the spread of Covid-19. The Club said that this had led to major changes in many clients’ underlying businesses; from a breakdown in the supply chain that ultimately led to a complete halt in activity or to a slow down. Force majeure became the topic of the day. “In one week alone in the Dubai office in late March, we opened 60 new files advising on force majeure under FD&D cover”, the club said.
The initial disaster appeared to have been averted, but how the recovery would look was less clear.
The shipping market had taken a hit; rates were depressed, as was demand, and vital cash flow had been switched off. The Club said that there would inevitably be casualties, which would have a knock-on effect in confidence. China was stocking up following the lock down, but elsewhere normal demand for product remained depressed.
The Club said that, pre-pandemic, some well-known insurers had been relying on their investment income to subsidize significant underwriting losses. “Faced with that subsidy having disappeared this year, but also free reserves suffering, there will be a significant impact on financial rating. The ones that will be impacted the most were not “A” in the first place”, the Club claimed.
It also warned that the Insurance market could be one of the biggest losers. This would not be driven by cargo claims in the marine market, but by business interruption claims in the non-marine market. The value of Covid-related claims could run into tens of billions of dollars, with the final scale of the insurance loss only being known in the months and years to come, the Club said. “But if it’s as bad as some are predicting it’s likely to result in an increase in all premiums from home and contents, to motor and also to marine.”
The Club said that it was fortunate to have the support of Great Lakes and Munich Re, which it said were “uniquely placed to see through the worst of this Insurance crisis having traded through other market changing events over the last 125 years”.