Ways of working

Across the globe, various government orders to reduce the spread of Covid-19 have led to the temporary closure of business and offices. For those of us fortunate enough to be able to continue working from home, many are experiencing an unprecedented change in how business is conducted. 

The insurance industry is adjusting to a different way of operating, arguably none more so than the London Market. Due to the UK’s social distancing guidelines, Lloyd’s closed its Underwriting Room on 19 March, for the first time in over 300 years of trading, transitioning from the ‘face to face’ negotiation it is renowned for to electronic trading through its digital solution, Placing Platform Limited (PPL). The transition has been supported by emergency trading protocols established by Lloyd’s as part of their business continuity plans.  

At Miller, we began working from home over a month ago and our adaptability and agile nature has ensured that we continue to deliver the very best service to our clients during these challenging times. Discussions continue to take place via phone, email and video, and we have successfully placed large renewals, serviced existing business and negotiated terms on new enquiries whilst ourselves, our clients and underwriters all work remotely.

Market response 

As the potential severity of Covid-19 became clearer, underwriters sought to insert specific exclusions to address communicable disease exposure on new and renewing business. This includes an exclusion clause of Covid-19 (LMA5391), followed by a specific exclusion for marine and energy liability policies (LMA5395). 

Currently there is no consistent, market-wide approach to applying such exclusions to marine liability risks. Some markets insist upon an exclusion on all policies, some require senior management sign-off to write business that does not contain an exclusion, and others are able to make a judgement call on the potential exposure each risk brings. We are aware of all our markets’ position and consider this when negotiating and placing new and renewed business.

Claims

Whilst the overall claims impact is largely unknown at this point, Lloyd’s recently requested that all syndicates report on their Covid-19 exposure for all classes of business. A standard response to any event that could have a significant impact on the market. 

In marine liability, the extent to which insureds may find themselves liable for losses arising from Covid-19 is unclear, however the potential for a greater frequency of claims would appear to be relatively limited in comparison to some other classes. 

Impact of reduced marine sector activity

Whilst the quantum of marine liability claims is less clear, the reduction in global trade is significantly affecting the shipping industry: 

• Many countries are now beginning to see the effects of restrictions on their economies, and the potential for prolonged economic downturn and turbulence in global financial markets.  
• Cruise lines have suspended operations due to travel restrictions, as the last ship carrying a significant number of passengers docked on 22 April. 
• Government imposed workforce restrictions can lead to longer loading / unloading times at ports, resulting in delays in accessing ports. 
• Vessels have found it difficult to obtain clearance to dock or change crew at some ports due to fear of Covid-19 being on-board.
• The reduction in trade has seen fewer vessels calling at ports, creating a situation where ports have been forced to lay off workers.
• Oil and gas contractors are having contracts postponed as uncertainty grows and companies prioritise urgent works and defer others.

All these situations can considerably alter risk profiles and thus affect insurance requirements and arrangements. Underwriters recognise the potential need to adjust, cancel or re-rate terms on accounts agreed before the Covid-19 pandemic. However, factors such as upwards pressure on prices in the hard market and minimum premium requirements for the capacity deployed, regardless of the time on risk, will be of influence. 

We’re here to help

As the impact of Covid-19 increases on us all, our priority is communicating with our clients. 

We would encourage you to let us know of any change to exposure levels or requirements as soon as possible, and to begin renewal discussions earlier than usual. The more information we have, the better we can negotiate on your behalf.