The recent volatility in oil prices caused by the coronavirus pandemic has been a matter of great concern within the global marine sector, with Bloomberg recently revealing that China’s oil demand has dropped by approximately three million barrels a day. This has raised issues within the marine insurance market, where the long-term impact of the pandemic will be determined by how long the resulting global lockdown remains in place, according to Sedgwick’s head of marine, Ton Schox (pictured).
Having colleagues all over the world has given him insight into the uncertainty that has been caused by the pandemic. What was written two weeks ago is old news today, he said, as things are changing constantly. The marine sector has never experienced anything like this with so many claims drying up overnight and the closest comparison in his living memory is that of the strike unrest in the Port of Rotterdam many years ago. His team in the Netherlands is being kept busy by its work in the event claims space, but in other areas, there is currently a reduction in claims.
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Schox believes that if the lockdown is lifted in a relatively short space of time then the market will be able to adjust itself and return to some kind of normality, though he noted that it will likely take at least a year before the economic situation has improved. Looking to the long-term development of the marine insurance sector, a substantial sea-change may occur when it comes to how claims are handled.
“Right now we do not go out for very small claims,” he said, “we do it by telephone or by video conference or by app. We have an app that we can use to see what’s going on and we already use this for smaller claims but I think we will probably see that this threshold will go up. In the end, claims are being dealt with as we speak because, though we do have fewer claims, claims are not going away. In the future [more claims] will probably be handled with this efficiency and from a desktop, where possible, instead of the traditional visiting and spending hours travelling to and from a claim.”
Another essential consideration Schox noted is how consumer buying habits may be altered by the coronavirus pandemic. Shops that were previously full of people are either closed or opened at vastly reduced opening hours, he said, and the public are simply not spending their discretionary incomes. If you go out in Rotterdam at the moment and you want to spend your money, there is no place to do so, and this is the same in countries all over the world. What the impact of this will be on the marine sector is too soon to tell but there can be no denying that there will be an impact.
Changes to the policy wordings of the marine insurance sector will inevitably stem from this event, he noted, and policy writers and brokers in the market will already be looking at this, as the existing policies simply were not written to cover such a major event. The impact of the pandemic will probably be akin to cyber, as when cyber first started the market did not know what to do with it and had to create new wordings but now it is well-known, whether or not it is widely insured.
Schox detailed, however, that there is no saying what the next big event in the marine insurance sector will be. From ransomware attacks to containership fires to the issue of claims arising from the delays caused by the bottlenecking of ports from the coronavirus, the next crisis is as yet unknown. Nobody thought that the coronavirus would happen, in the same way that nobody imagined the extent to which containership fires could impact the sector, and every few years a new crisis comes along to disrupt the industry.
The marine insurance sector is a close-knit global community, Schox noted, and the level of cooperation and support within the sector allows for these problems to be examined and tackled with a broad range of expertise available whenever, and from wherever they arise. Unlike many non-marine areas such as property, where 90% of the work carried out is done within a locale, the nature of the marine sector is global in its outlook, and there is a lot of contact between companies.
“That’s why the team spirits in the marine world have always been very high,” Schox said. “I know the majority of the team leaders in the sector and I have met them before when we have meetings in Singapore and London, or at seminars like the IUMI conference. And if everything goes well we will be at the IUMI conference in September in Stockholm and, again, attendees will come from all over the world, so we will see each other again.”
