Broker Check

How Was the Suez Canal Blockage Like a Pandemic?

April 01, 2021
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A major news story with insurance implications was the grounding of the Ever Given  in the Suez Canal, totally blocking it and backing up ships for days. While the ship has now been refloated, it raises the question of how this disruption resembles and differs from the other disruption in our lives - COVID-19. My thoughts:

  • Both disruptions were unusual but not unforseeable. Ships frequently run aground, but seldom is a ship big enough to block a major waterway (the Suez Canal carries about 12% of the world's trade). We have also had pandemics before, but most not as widespread or deadly as COVID-19. Both of these occurrences could have been foreseen and prepared for.
  • There are consequences beyond physical loss. COVID-19 has changed work habits, social life, healthcare, etc. - to some extent permanently. The canal blockage has disrupted shipping and supply chains and may lead to rethinking current practices.
  • From an insurance standpoint, not all losses are covered and some are uninsurable. Ocean cargo insurance is broad, but standard clauses exclude delay even if caused by an insured peril. According to Lloyd's List, only about 10% of ships have delay coverage, which is available, subject to deductibles and waiting periods,  from protection and indemnity clubs.
  • Coverage for lost income due to a pandemic lockdown is generally considered uninsurable. (Some courts have ruled inability to operate is physical loss, but until appeals courts rule this is an open question.) Policies with a virus exclusion certainly would not provide coverage. Unlike the shipping industry, businesses affected by COVID-19 will probably have to wait for a government or public-private solution.