Marine insurers have found themselves in rough waters for the past two years. First, it was Covid that decimated global supply chains and then, just as the marine sector was starting to show tentative signs of recovery, the Ukraine invasion happened. This while Covid remains a moving target and far from being a challenge of the past.
China, the world’s most prolific exporter, has a zero-tolerance approach to Covid, which has seen that country shut down entire cities, and in some instances ports, often without notice. Most recently, Shangai – home to the world’s largest container port – was impacted as the city went into full lockdown. Though the port is now operating around the clock (with workers kept inside a ‘closed loop’ bubble and not allowed to leave the premises), cargo movement is still disrupted as trucks battle to move in, out and around the city.
Port congestion has also provided its fair share of headaches. According to Vessels Value, a global shipping data provider, the number of ships waiting outside Shanghai Port had risen almost five-fold to over 300 in recent weeks.
“While lockdowns can be implemented with little or no notice, once lifted, it takes time for the supply chain to get moving again,” says Dominique Potgieter, Executive: Marine at Guardrisk.
“Port delays – due to Covid, and more recently the Ukraine invasion – have also had a substantial impact on the movement of perishable cargo. Exporters have had to find alternative markets for such cargo and shipping lines have had to secure different ports to berth in. This has exacerbated delays as misdirection and increased handling of cargo, along with insufficient plug points to keep the reefers going, led to demand outstripping supply.”
In some instances, exporters have donated shipments to alleviate hunger and avoid wastage; one such was a South African fruit exporter that recently rerouted a shipment of pears destined for Russia to the Ukranian refugees, rather than let the fruit that was still in good condition, go to waste.
The current invasion of Ukraine is having a considerable impact on the local marine insurance sector, and the local economy, because South Africa is a significant trading partner of both Russia and Ukraine. For example, the Russian orange market is solely reliable on imports since oranges are not grown there, and South African citrus exporters play an important role in the export of citrus (notably, oranges) to Russia.
Exporters and shipping lines have also had to contend with the challenge of sanctioned cargo, such as parts for aircraft and motor vehicles, which can no longer be shipped to Russia ports.
As for insurers, Potgieter expects that most marine (import/export) policies contain the sanctions limitation exclusion clause that would preclude insurers providing cover or paying claims, which would expose the insurer to any sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulation of the European Union, United Kingdom or United States of America.
Yet, despite the prevailing challenges facing marine insurers, Potgieter is optimistic about the sector’s future, even though “the current challenges are anticipated to continue for the best part of 2022”.