Insurance Jottings
Covid-19’s impact on marine market far from certain as price hardening continues
Covid-19 has cast a web over many facets of the marine insurance market with protection and indemnity (P&I) carriers potentially on the hook for cruise company claims while the stock through-put sector possibly facing claims as cargo is held in storage for longer.
Lloyd’s: Covid-19 will cost global P&C industry US$203 billion
On the 14th May, Lloyd’s predicts Covid-19 will cost the non-life industry US$203 billion in insured and investment losses, making it the largest loss event ever experienced by the global market by some distance.
Lloyd’s estimates Covid-19 loss at US$3 billion-US$4.3 billion
Lloyd’s has unveiled the industry’s largest Covid-19 loss estimate by some distance with an initial range of US$3 billion-US$4.3 billion and warned it could increase further if the “current lockdown continues into another quarter”.
Lloyd’s CEO, John Neal, also said he is busy working on a number of different Covid-19 initiatives including a new vehicle, Recover Re, an insurance vehicle that will offer “after the event” cover for pandemic related business recovery, including the current Covid-19 pandemic.
New recommendations on building cyber resilient ships
13 May 2020
As technology has been increasingly incorporated into the shipping industry, in an attempt to reduce human error in the management and navigation of vessels, there have been nefarious attempts (some successful) to discover and exploit cracks in these computerised systems.
Cyber-attacks have become an expanding and real threat to vessels which have shifted the risk from internal vulnerabilities to external ones.
In efforts to ensure that the technology incorporated into vessels is as robust and capable of meeting these new types of threats, the International Association of Classification Societies (IACS) has publicised a new recommendation on how to build cyber resilient ships. This is an attempt to ensure a set of standardised criteria can be met to combat deficiencies and weaknesses in systems incorporated into new buildings.
It applies to the use of technical systems that provide important functions on board such as control, alarm, monitor, safety and internal communication.
According to the publication, it
‘is to provide technical requirements to stakeholders which would lead to delivery of cyber resilient ships, whose resilience can be maintained throughout their service life’.
It is meant to provide
‘crew and ships the capabilities to effectively cope with cyber incidents occurring on computer-based systems onboard which contribute to operate and maintain the ship in a safe condition’
– in a context of prevention rather than cure.
The recommendation is written with recognised elements of effective cyber risk management in mind – Identify, Protect, Detect, Respond and Recover. These are also used in the IMO and the industry guidelines.
The recommendation can be found on the IACS website.
Source: Standard Club
Brit and Google launch follow-only syndicate Ki
Brit Insurance is to launch the first fully digital and algorithmically-driven follow-only Lloyd’s syndicate using a technology platform built in collaboration with Google Cloud, the Fairfax Financial-owned company confirmed on the 13th May.
Marine hull market on heightened alert as hurricane season looms
With the 2020 North Atlantic hurricane season fast approaching, the marine hull market faces the prospect of hundreds of high value vessels – from cruise ships to sailing boats – having to relocate ahead of the 1st June.
US Treasury shares concerns about retroactive BI legislation
The US Department of the Treasury has responded to letters from members of Congress that urged the Trump administration to oppose retroactive business interruption (BI) proposals by saying it shares their concerns about forcing insurers to pay Covid-19 claims.
National Governments Must Help Provide Insurance for Future Lockdowns: EU Regulator
National governments must help provide insurance cover for future lockdowns, the industry’s European Union regulator said on the 11th May, as the private sector cannot afford to provide such broad coverage on its own.
Countries have introduced lockdowns to fight the coronavirus pandemic, forcing companies to close and furlough staff. Businesses are fighting to get insurers to pay business interruption claims as a deep recession beckons.
Some US states may retroactively change insurance contracts to pay such claims, and Britain’s markets watchdog is asking the courts to clarify wordings in business policies.
Gabriel Bernardino, chair of the European Insurance and Occupational Pensions Authority (EIOPA), said it would be wrong to retroactively change policies.
It was also impossible for insurers to control risks like business interruption that is not due to damage like floods or fire, he said.
“If we really want to build more resilience in our societies against situations like this pandemic, there is clearly a need to have in place mechanisms to cover it,” Mr Bernardino told Reuters.
“To be honest, I think it’s only possible by combining public and private elements. I don’t think this is possible for the insurance industry alone to cover it,” Mr Bernardino said.
Britain, France and the United States are already looking at what role the state could play in pandemic cover in the future.
Insurers have been hit on both sides of their balance sheets, as falls in asset prices hit their investments while claims rocket.
“Overall the sector has weathered well this unprecedented situation,” Mr Bernardino said.
“This volatility that we see on equity markets probably will continue, and we have some doubts if the market is already discounting the impact of the GDP contractions which are out there from the various authorities.”
As a precautionary measure, EIOPA’s board “nearly unanimously” called on insurers in the EU to preserve capital by suspending dividends until the outlook becomes clearer.
But Germany’s Allianz, backed by EIOPA board member BaFin, is going ahead with a dividend.
“The final decision is from each and every one of the national authorities,” Mr Bernardino said, adding there was “overwhelming” backing among national regulators to implement EIOPA’s recommendation.
The crisis has also been the first big test of EU insurance rules known as Solvency II, which are being reviewed this year, raising hopes among insurers of a scaling back to some extent.
“We believe the system was working overall quite well and what we see until now during the crisis confirms that,” Mr Bernardino said.
“We don’t anticipate any fundamental changes but there will be lessons which will allow us to do some fine-tuning,” he said.
EIOPA will send its recommendations for changes to the EU’s executive European Commission by the end of the year