Posted on: 11 February 2020
International legal firm Kennedys looks on the impact the current coronavirus outbreak is having on insurers in a recently issued article.
Since Coronavirus (recently named COVID-19 by the World Health Organisation (WHO) was first reported from Wuhan, China on 31 December 2019 it has spread to 25 countries, infecting tens of thousands people and claiming over 1,000 lives.
While priority measures are understandably focussed on the threat to life and health, with governments around the world implementing quarantine procedures and increased health checks, global trade and business has been and will continue to be affected. We offer some initial thoughts about the wider, global impacts for insurers, areas of potential exposure and what steps firms should be taking.
The article lists a number of sectors and how they are being affected, saying the following about the Marine:
The shipping industry’s movement of goods and people around the world, coupled with China’s position as the second biggest economy in the world, has left it more susceptible than most to the impact of the new strain of coronavirus from Wuhan.
China’s reduced demand for resources has resulted in drop in demand for oil. Sinopec, Asia’s largest refiner, has reduced its operations, VLCC (very large crude carriers) rates have fallen to their lowest since mid-September and there has been a 90% drop in rates for iron ore carrying Capesize vessels.
A number of charterparty issues are also expected with delays occurring in and out of Chinese ports, at non-Chinese ports in the event of a previous call at a Chinese port and/or any suspicion that the crew may have been exposed to COVID-19. Vessels may find themselves quarantined or required to deviate. There may be delays in obtaining free pratique (clearance given to the vessel by authorities confirming that the vessel is free from contagious disease).
Issues may also arise regarding whether orders to particular ports may be orders to an unsafe port and therefore not legal under the terms of the charter. Vessel delays will inevitably lead to potential cargo losses, especially to perishable cargo, leading to bill of lading claims and insurance disputes, depending on the level of cover. Moreover, should the COVID-19 outbreak become a pandemic, it may trigger force majeure clauses commonly found in contracts.
Another side effect has been the delays in the fitting of scrubbers required for many vessels to comply with the IMO’s Sulphur Regulations 2020. With many of the scrubber upgrades having been planned to take place in China, workers may not be available to return to the shipyards to complete the works commenced prior to the Lunar New Year.
In the cruise liner space, more than 5,300 people are currently quarantined on two cruise ships off Hong Kong and Japan amid concerns passengers and crew have been inadvertently exposed to the virus by infected passengers.
These incidents have raised concerns about potential spread of infectious diseases among thousands of passengers at sea and exposes the vulnerability of cruise liners to risk of outbreaks due to the close living quarters of passengers and crew.
Used this link to see the full article.