As stated in a recent research report entitled “The Impact of Coronavirus Outbreak on Cargo Insurances: Challenges and Strategies”, cargo insurance covers losses related to any damage to the policyholder’s property while loading, transporting, and unloading procedures. This is essentially significant in the international trade and supply chain.
Since the beginning of the coronavirus outbreak, despite reduction in the losses incurred in this line of business, the total written premium has plummeted over 50% and such declining trend is felt in the numbers of the policies issued.
According to the results of this study, the demand for cargo insurances even before being affected by the premium rate is rather heavily influenced by the external factors outside a country such as foreign exchange earnings, imports, and macroeconomic policies. 85% of the cargo insurance portfolio is contingent on the imported goods and any slight changes in the export and import conditions will alter this insurance business line.
Based on the results of the study, coronavirus pandemic by limiting ports’ activities, lack of professional workforce, changing routes of the ships due to the ports’ restrictions, and reducing the financial strength of the transportation companies, has increased losses suffered by the cargos and heightened risks in the cargo insurances. At the meantime, the losses incurred by the vessels and their cargos during their disinfection and decontamination procedures, accumulation of the midway inventories, limitation of the initial inspections and the lag in loss assessment amid the coronavirus outbreak with their impact on paid losses will increase the insurers’ risks.