Michael Ingham Divisional Director, Marine Hull/Liability has written for Gallagher on the current situation in H&M and War Risks.
He noted that the world was facing “an unprecedented global pandemic”. The measures taken by governments across the globe to tackle Covid-19 were bringing huge changes to many aspects of the way we work and live. The full extent of the impacts of the virus remained largely unknown and difficult to predict.
Shipping was extremely sensitive to the effects of any global crisis, especially one of this nature. There have been direct effects from the spread of Covid-19, such as the many crew welfare challenges, coupled with the well documented cancellation of many passenger services and cruise operations across the globe. The indirect consequences were also plentiful, with the concomitant downturn in global trade and a decline in oil prices.
From an insurance perspective, Gallagher said that the industry was facing large losses as a result of Covid-19. “We are only beginning to count the potential cost of losses, most notably arising from cancellation of events and disruption to business”, the broker said.
There would be a short-term contraction in global premiums, but Gallagher said that the industry was robust in the face of these challenging circumstances. Back in March the London Market had adapted quickly to a completely new way of remote working. The placement and servicing of risks continued to be handled efficiently by both insurers and brokers in London and around the world.
Gallagher predicted that the industry would step up to play an important role in rebuilding the sectors which had been so badly affected by this crisis, whilst aiming to help shape the global economy as it recovered.
The Hull & Machinery Market had continued to follow a hardening trend in the early part of 2020. Where the London market was generally the first to come under pressure for rate increases in the second half of 2018 and throughout 2019, it seemed that most insurers around the world were now pushing for rises.
Gallagher said that many insurers were being urged to write less premium more profitably. It had been argued that, even after successive increases, the majority of fleets were still priced at levels well below what was considered to be technically adequate. As such, many underwriters were still prepared to let business go if they did not see the rate increases they were looking for.
In the absence (for the most part) of new capacity entering the market, the outlook appeared to be for more hardening throughout the latter part of 2020, and possibly beyond, Gallagher said.
A surge of industry losses due to Covid-19 was likely to increase financial pressure on many companies and syndicates and Gallagher said that undoubtedly this would further reinforce the need for many to maintain a tough stance on rates.
Gallagher said that it was not seeing Covid-19 present an issue for insurers in respect of Hull & Machinery policies, which were covering losses in respect of physical damage to vessels. However, there was certainly plenty of debate and discussion around Loss of Hire policies and the possible inflation of claims due to Covid-19 related issues.
If a vessel suffered a severe engine breakdown, the subsequent loss of hire claim could be more expensive due to extra time taken to carry out repairs.
While new entrants to the Hull & Machinery space had been limited, and far outweighed by those exiting over the last two years, North of England announced that it would begin writing Hull & Machinery from July 1st 2020. The avowed intention was to offer shares for both North members and non-members based on quality of risk and suitability of terms. James Sutton (Class Underwriter) and Alex Fuller (Senior Underwriting Executive) joined the marine insurance sector.
There have been some notable piracy attacks in the Gulf of Aden close to the coast of Yemen in recent months. While they had not been successful, Gallagher said that this was a stark reminder that the threat still remained high, especially given the deteriorating situation within Yemen. Despite there being no further recent attacks on shipping in the Straits of Hormuz and Persian Gulf, Gallagher said that, due to the volatile political landscape, the threat in this region also remained high.
The situation remained dangerous in West Africa, particularly in the Gulf of Guinea region, where 16 seafarers were kidnapped from different vessels within the space of five days at the beginning of May.
Gallagher said that for its Marine Team it was very much business as usual. “Whilst we are still away from our offices for an unknown length of time, we have quickly become accustomed to our new way of working”, the broker said.
Market Moves Richard Bridges and Ross Deering have joined Travelers to underwrite Hull & Machinery and War Risks. Both were previously at Axis Syndicate. Chris Goddard has left Travelers to underwrite War Risks for a new MGA called Vessel Protect.
IMN will cover Gallagher’s commentary on Loss of Hire in tomorrow’s issue.