CORONAVIRUS & EXOGENOUS FACTORS UNDER RISK MANAGEMENT PERSPECTIVE

Shipping is commonly considered a high risk business by nature, to a large extent driven by the supply and demand of available tonnage capacity at any given time.
There are periods of great vessel demand, port-to-port transport of raw materials, fuel oil, agriproducts, ready-made goods, etc., around the globe.
There are also slump periods due to various parameters such as global or national economic recessions, political turmoil, severe weather conditions, war, piracy, and other critical endogenous or exogenous factors affecting tonnage supply or demand, and consequently, market freight rates per ton. One exogenous factor that we are currently seeing that negatively affects the industry is the coronavirus COVID-19 disease, which broke out in January 2020 in Wuhan, China, forcing factories to shut down and many ports and shipyards to close.

This exogenous factor, affects the need for sea transport and the demand for vessels, since many trade orders for raw material imports and export of goods to and from China, have been suspended indefinitely, thereby leaving a huge import – export market economy paralyzed. Shipping investors, both shipowners and charterers, and shipping stakeholders in general, have suffered a blow to their financial statements.

Vessels that were ready to enter a Chinese port for loading or discharging were forced to carry out their operations under port restrictions and were thus affected economically.
The exception was those ship managers/ship owners who had been proactive, risk conscious, and taken out a LOSS OF EARNINGS & CASH FLOW PROTECTION INSURANCE POLICY.

This is a combo policy for Loss of Hire, Trade disruption and Strikes, covering the risks of vessel loading delays, discharge, transhipment, delivery of cargo, or inability to deliver cargo, due to total or partial emergency closure of any port or navigable waterway by, or under the lawful order of any authority having jurisdiction to make such order.
Insurance is an essential key factor in Risk Management which, when combined with the right well informed Risk Prevention practices can save hundreds or millions of US dollars for vessel owners and investors.