July 23, 2020 by Greg Meckbach
Marine cargo policies that were drafted before the COVID-19 pandemic may need a second look because of the way business disruptions and lockdowns are affecting the global supply chain.
“We are starting to see insurers already change or apply endorsements with changes in language to clearly define the word ‘pandemic’ or the word ‘disruption’ in the policy trigger,” said Tracy McLean, Toronto-based senior vice president of global logistics with brokerage NFP, in an interview Thursday.
McLean was commenting specifically on the impact of COVID-19 on marine cargo insurance.
Since COVID-19 was declared a pandemic this past March by the World Health Organization, many jurisdictions worldwide imposed various closures and rules limiting the size of gatherings.
Some lockdowns are affecting ports overseas. As a result, some ports are not able to receive cargo at the same rate as they could before the pandemic. Other ports are unable to receive any cargo at all because there are not enough people working there, McLean suggests. Sometimes there is no space in a warehouse to accept the cargo, so it is redirected to another port.
This is an issue for marine cargo clients because delay is often not a covered peril.
So goods could be in storage and there could be delays in getting dates for shipments due to the pandemic, said McLean.
“The public is not aware of all the problems that are starting to occur behind the scenes,” said McLean. “The big question mark is around the cause of all these disruptions being COVID-19 and how the pandemic, legally, will really test all these different insurance policies that people have.”
There is an additional cost to re-routing goods and some of these are due to government prohibitions – or to governments putting in new measures due to the pandemic. Often these additional costs are not covered under insurance policies.
“People are learning more now about what happens in supply chains because of COVID-19,” said McLean. “This is now where we are now in a completely new world. So all of these policies that were designed to meet our past day-to-day business operations are now being tested to the max.”
New York City-based NFP has made dozens of acquisitions over the past couple of years. Several of the Canadian brokerages acquired by NFP, among them Dalton Timmis Insurance Group Inc. and McLean Hallmark Insurance Group Ltd., are now using the NFP brand name.
Feature image via iStock.com/RyersonClark