As a long established insurance broker focused on meeting the needs of transport and logistics businesses, we have considerable experience in the ebbs and flows of the sector. At a time of rising pressures on the cost and availability of motor fleet insurance, the sector is just beginning to start to have to deal with the global impact of Coronavirus. It’s looking like a perfect storm in the short term and buyers of insurance should take notice.
What is the Current Situation?
The coronavirus has caused severe disruption around the world and particularly in China, the world’s second largest economy and a significant supplier to the world. We are seeing the vast majority of Chinese provinces closed for business, vessel calls to ports falling rapidly, factory shutdowns and other restrictions. Whilst we don’t yet have enough empirical evidence of the impact, suffice to say that we know what’s evolving – seven of the world’s top ten container ports are based in China. Many industries are being affected, not least those involved in container based transport.
The non-delivery of cargo to the contracted destination poses a significant threat to many involved in the sector and right now contract conditions are being examined in order to understand who might be accountable and also whether insurance is in place to compensate. Even where contracts have been concluded, the majority of them will include a force majeure or similar clause which will prevent the aggrieved party from recovering from the seller in the event that the cause of the loss is, broadly speaking, outside the reasonable control of the seller. Cargo owners ultimately are likely to suffer the worst as in general terms insurers seek to avoid any loss that doesn’t involve physical loss or damage – not delay.
What Can We Expect Next?
- Risk management will come to the fore – specifically contract conditions and insurance policies are likely to be reviewed in even more detail.
- Insurers will adopt more stringent risk selection measures, leading to price increases and cover restrictions.
- Transport and Logistics businesses will need to be able to adjust vehicle numbers quickly to respond to reduced demand and minimise the impact. Those with fixed lease contracts will be less able to minimise impact. On the flip side, if we anticipate surging demand towards Christmas (assuming the virus is contained) then companies with fixed capacity will be able to respond to these increases.