What a Third Year of COVID-19 Means for Marine Re/Insurance

By Alex Mican, Director Product Development Specialty Lines – PCS®, a Verisk business, IUMI Professional Partner, - PCS Global Marine and Energy

COVID-19 continues to pose an intensifying threat to supply chain resilience as we enter the third year of the pandemic. And with 1 January 2022, reinsurance renewal right around the corner, underwriters and actuaries are keen to understand the impact that the pandemic could have on loss creep for 2022 events, as well as those from 2020 and 2021 that are still developing. A heightened risk environment, elongated claim lifecycles, and materials and equipment price volatility bring plenty of additional uncertainty into the annual reinsurance ritual.

As we head into the new year, vaccination rates among the countries that produce most officers and crew remain an important problem, with reverberations across the marine market. In addition to simply creating a shortage of talent, it can exacerbate the ongoing issue of stranded crews long past the ends of their assignments, with attendant morale and physical risks that can be translated into increased loss frequency, as well as the risk of greater severity.

Underlying the entire issue is uncertainty about future rates of infection in the countries where most crew and officers tend to originate. Again, low vaccination rates have shrunk the pool of available labour, and increases in positive transmission could further constrain the market with little notice. Meanwhile, global consumer demand is on the rise, which only puts further strain on global supply chains – and increases the risks inherent in them.

The re/insurance industry faces several concerns. Port accumulations pose both manmade accident risk and natural catastrophe exposure, particularly in busy U.S. ports during hurricane season. Fatigued crews and onshore labour shortages increase the risk of accident while also contributing to port accumulations, and when accidents or natural events do occur, the time and cost to remedy them are invariably higher than they would be in non-pandemic times. To price and underwrite marine risk without a serious recognition of what COVID-19 could mean for developing and new losses would be to ignore additional risks that could have a material effect on a policy or treaty.

The pandemic has gone on long enough that most in our industry know it affects risk quality and price across the marine market. It’s important to be sure to integrate that thinking into the business.