Riding out the rough waters of COVID-19
July 2020 
Written by Royston Ford, Strategic Portfolio Manager - Marine

With empty cruise ships moored up around the world, our marine and underwriting teams are seeking upon a new data source to help manage our marine risks.

As the Coronavirus began to take hold in March, the cruise liner industry ceased commercial operations and cleared their calendars for much of the rest of the year. They refocused their ships on the complex task of returning tens of thousands of crew members to their homes around the world – all in the face of an aviation shutdown and border closures.
 
With most of their crews now safely home, the halt on operations has left ghostly ships marooned in harbours around the world. The problem for cruise companies isn't just the loss of revenue from the travel bans; their costliest assets, the ships themselves, are at risk too. To mothball ships as complex as these is a major engineering project. As is the process of restarting them when the time comes to sail again. To make sure that nothing seizes up the ships are kept in what's known as "warm lay-up", where skeleton crews keep the reduced systems running. A full complement of mariners then keeps the ships sailing safely between ports and anchorages, where they wait out the virus.
But even then, there's still the risk of hurricanes or bad weather. Ships will have to be able to move to avoid potentially catastrophic damage. Thankfully, modern cruise liners can travel a lot faster than your typical weather storm. But quick action and early warning systems are crucial to ensuring they can clear the area in time.
 
Naturally, as a marine insurer, RSA has a vested interest in this area. But during the pandemic, when almost all of the world's cruise liners are moored up, this concern is particularly pronounced. Mechanical failure or storm damage to ships worth hundreds of millions of pounds is in no one's interest, least of all the insurers that cover them.
 
However, like other areas of our business, our underwriting and marine teams have kicked into action and used ingenious thinking to tackle the problems thrown up by COVID-19.
 
Ships around the world use an automated tracking system called AIS to navigate and avoid other vessels in their vicinity. By tapping into this data feed, we've been able to cross-reference it against the ships that we insure. Our underwriters can then use this to live track the vessels, review their recent movements, and spot any causes for concern.
 
For example, if we found that a ship hadn't broadcast a signal on AIS for an extended period of time, it could be a sign that it's been completely shut down. This might mean it wouldn't be able to quickly avoid an approaching storm.
 
We can also use the data feed to see the distribution of ships, particularly if a number of them are moored in the same dock. This helps us to manage risk accumulations and talk to customers about mooring, safety, and supervision plans to help minimise risk.
Having this data and the skills to rapidly develop business applications like this are benefits from our development of Periscope. Periscope is a proprietary risk quality model for ships that merges construction, navigational and regulatory data on the entire world's maritime fleet. Coupled to our marine exposure and claims data, it supports underwriting risk appraisal.
 
Several commercial companies have realised the value of this data and have repackaged it as a saleable product to other insurers. However, at this moment in time, we are the only insurance company that has developed the capability to access this level of raw marine data in-house. This not only sets us apart from others, but gives us real credibility with our customers, brokers and reinsurers.
 

If you'd like to find out more about the work we have been doing, please get in touch with Royston Ford on our Marine portfolio management and underwriting team.