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Fears growing over risks to supply chain from new variant, marine insurers warn

Little impact so far from the new coronavirus variant of concern, but fears are growing about problems not too far down the line

Insurance industry raises concerns about lack of personnel, port congestion, reduced ship capacity and containers, pressure on the bottlenecks and shortages in production

THE new coronavirus variant has had little impact on marine insurers so far, but possesses the potential to cause major problems as it becomes more widespread, according to the sector.

A main concern is the increased strain Omicron cases will place on the supply chain, with infections and the need for self-isolation taking out key personnel needed to keep ports running smoothly. Certain jobs central to claims handling could be similarly impacted.

P&I insurers have already been stumping up to cover the costs of quarantine, repatriation and substitution of seafarers, and payouts will at least continue and could get higher.

The warnings come as shipping groups launch a network of approved quarantine hotels for seafarers, known as the Crew Enhanced Quarantine International Programme.

Omicron’s emergence has also prompted the World Health Organisation and International Labour Organisation to form a new action group to ensure implementation of coronavirus protocols for transport workers.

“The Omicron variant has exacerbated the already existing logistical challenges with extended quarantine requirements and crew change difficulties,” said Skuld chief executive Ståle Hansen. “Even if it turns out that the new variant is causing mild symptoms only, we expect that these challenges will continue until there is a clear policy change among governments and the restrictions are removed.”

Skuld is increasingly concerned about the wellbeing of seafarers, as victims of both the illness itself and the consequences of the harsh travel restrictions imposed around the world, he added.

“It really is too early to say. We are not noticing an increase in claims, albeit we anticipate that it could result in potentially more incidents being reported,” said Simon Swallow, chief executive of the Shipowners’ Club. “Primarily our focus appears to be more towards the inevitable problems caused through the indirect consequence of the virus impacting certain sectors essential for the prompt management of the claims process, such as surveyors and salvors.”

International Union of Marine Insurance secretary general Lars Lange echoed concerns about threats both to seafarers and to other workers in the supply chain.

“Lack of personnel due to potential infections, port congestion due to closures, lack of ship capacity and containers, pressure on the bottlenecks, shortages in production adding additional burden to the transport supply chain. It is a never-ending story,” he said.

Suzanne Byrne, group head of claims at West, agreed that it remains too soon to tell how big an impact Omicron will have, whether in terms of direct impact by seafarers contracting the new variant or the re-emergence of seafarers being unable to return home at the end of their contract.  

“We will be working with our members and global partners to ensure that effective mental health coping strategies are available for any crew who may be affected by the new variant, or who could be faced with another extended period at sea. We also continue to strongly advise our members to arrange for all their crews to be fully vaccinated as soon as possible.”

Meanwhile, Gard — the world’s largest P&I club — has outlined the three main cases in which it will cover costs in pandemic-related crew claims.

These are essentially crew illness, quarantine and disinfection, and diversion to land ill and deceased crew, as set down in Rule 27 of the club’s rulebook.

The first heading will include necessary medical evacuation, hospitalisation, medical care, maintenance, and repatriation expenses for infected crew, subject to the terms of their employment contract and/or any applicable law.

Liability can also arise if seafarers are infected on shore while in the service of the vessel, on their way to join the vessel, or on their way home after leaving the vessel. Provided that these periods are included under the employment contract, they are covered.

If a crew member is displaying symptoms of the virus during periods covered under the employment contract, reasonable testing costs are again covered.

However, if the seafarer is not showing any symptoms of the virus, and testing is conducted as a precautionary measure — for instance as part of crew change protocols — then the costs of testing are considered operational and not covered.

Costs incurred for the disembarkation and repatriation for regular crew changes, and crew who have completed their contracts are also deemed operational costs and are not subject to P&I cover.

Contractual sick pay and disability/death compensation are covered in the normal way.

Rule 48 covers costs and expenses, other than operational costs, incurred in connection with quarantine orders or disinfection of the vessel or crew on account of infectious diseases.

A quarantine order is defined as an order from local or national body that mandates restrictions on the movement of either the vessel or crew.

Certain jurisdictions require seafarers to self-quarantine before joining the vessel as a precautionary measure. Any extra costs here are considered operational.

However, if a quarantine order is imposed after disembarkation because the virus is present, costs and expenses relating to the quarantine period will be covered.

Costs and expenses incurred in direct connection with complying with a quarantine order are covered. But only net costs above the vessel’s usual running costs are recoverable.

Where it is necessary to disinfect the vessel or crew, necessary and reasonable disinfection costs and expenses, including the engagement of a specialised company to carry out the work, are covered.

Rule 31 provides that if a vessel must divert to secure treatment for an infected crew member, the extra costs of fuel, insurance, wages, stores, provisions, and port charges attributable to the diversion are covered where they are incurred solely for the purpose of getting medical treatment.

If a vessel must divert to secure treatment for a seafarer suspected but not confirmed to be suffering from coronavirus, cover will depend on the circumstances of each case.

In addition, these rules provide cover if a vessel must divert to transfer a dead person on board to shore for the repatriation of human remains.

As a consequence of the pandemic, some ports refuse to permit ships to transfer bodies of deceased seafarers to shore for repatriation to their home country.

Where owners have to keep the deceased crew on board for much longer than usual, cover has been made subject to the same considerations as for treatment of a sick crew member. This expansion of the rule applies retrospectively from February.

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