2020, the year of the… Rollercoaster!29/06/2021
2020 has also been a year during which certainty turned into uncertainty, the impossible into real, the unforeseeable into conceivable, and the “Never-happens-to-me” Club lost many members!
In our memory, it was the first time that every ship operator was affected by one event, everywhere and at the same time!
The pandemic that hit the world is perceived by most as a perfect example of a black swan event, and its effects will no doubt have a durable impact on the industry. We have a slightly different view as to the black swan nature, outlined in a separate article.
In 2020, operators were already coping with the new challenge of Sulphur 2020 implementation, only to face new problems and very few readymade solutions for losses that were unimaginable only a few months before.
Difficulties that called for even more flexibility in the context of a locked down world, which added frustration to damage!
In the marine insurance segment (and no doubt many other segments) “a good old fashioned hangover” from a cocktail of frustration, awareness of one’s vulnerability and the conclusion that reality always manages to surpass the most creative worst-case scenarios.
The new context also brought opportunities, as every crisis does, and no doubt these opportunities will have durable effects as well.
From our perspective, the pandemic gave us the opportunity to show clients that our delay cover helped them limit their losses in ways they would not have imagined when placing the cover in the first place.
It also helped many operators realise that they probably downplayed the impact on their books of mainstream exclusions and limitations, but having touched it with hand they quickly reacted by actively looking into boosting their non-mainstream solutions, in particular for losses caused by delays, demurrage or off-hires.
As it happened, we also saw delays caused by border closures or disruptions of port operations as shore labour refused to work because health safety measures were felt to be insufficient.
Looking ahead, we feel that the procedures for crew changes might affect seafarers (physically and psychologically), facilitating human errors that could lead to casualties and also trigger crew actions or desertions, despite operators’ best intentions and fullest efforts.
In pre-pandemic context, for ships flying flags of convenience and traditionally not particularly unionised this was considered a farfetched possibility but with crews’ legitimate health and security concerns this may somewhat change the game.
"What have we learned?"
First and foremost, that our cover responded to delay losses in its current shape and for the benefit of many clients, which ultimately is also our benefit!
The list of shoreside and ship related perils has not changed, and only a couple of minor clarifications were made to express more clearly the scope of cover, and took effect from January 2021.
We also learned that nothing beats a “hands-on” and service oriented underwriting approach.
"Back To Basics!"
In our books, “back to basics” means delivering individual solutions to clients through prudent technical underwriting, backed by solid reinsurance security.
To achieve that, the essential ingredient is proximity with the market, which is why we, as well as our Greek team, are (were) travelling almost continuously.
To no surprise, one of the consequences of the pandemic has been the travel restrictions, as it meant doing without the many long, sometimes heated but always pleasant, conversations with brokers, clients and potential clients about their working environment, their loss experiences and individual wish lists.
Sadly, this is now mostly done virtually, but we guess the silver lining of this cloud is that a lot of catching up lies ahead! Another way of going back to basics!
"But what is “basic”?
Quality? Quantity? Both?"
We strongly believe that at Nordic Marine we deliver quality and quantity of service, and are committed to continuing doing so.
Does service really have to be a choice between quality & quantity?
If one looks at the H&M market the question has some merit, because in the mainstream H&M market context, for example, the exposure on each slip is spread amongst many insurers, which means that there is not much room for customising a single policy.
As such, whilst mainstream H&M delivers quantity in terms of size of risk (but excludes the highest risk areas such as primary level delays) and well-known steady terms backed by first class capacity, it lacks the flexibility to customise its scope to fit the single need.
It is a “one size fits all” environment and we think the use of digitization of the last 15 months has cemented it further since a common topic that has been discussed by various market players in the last year is the digitization of underwriting thanks to the big data available.
The final result of such digitization would be for underwriters to write risks based on the same market information, with a market rate reflecting the same pricing (efficient market principles), i.e. a standard lead rate followed by all underwriters on the slip.
In addition, the declared intention is for this to be done in a digitalised way and not, as in the past, by the brokers through conversations and emails.
Fortunately for us (and brokers), the above scenario is not likely to be realistically achievable any time soon with niche covers, where data may be big but only very few players might be able to collect and present it to underwriters, which in addition must have the knowhow to translate it.
As most of you know, our “star” cover is the fixed premium primary layer delay cover, for which Nordic is undoubtedly the market reference in terms of expertise, competence and flexibility.
We pursue sustainability and stability through prudent underwriting approach and total commitment to clients.
It is reflected in the decision to take 10%, 20% and, since January 2021, 25% retention of the written risks.
As unlikely as they might have looked before 2020, thanks to the 2020 events, from 2021 onwards many operators facing similar unlikely situations have decided to take control of when their losses start and hedge against them with one of the niche solutions that Nordic Marine has delivered since day one.
They have joined a growing community that has realised that risk management is a living tool and must from time to time be adjusted to reflect the new risk environment ship operators works on, a topic we have earlier commented upon here.
Thanks for your vision, and welcome!
Dan & Claudio