Some box ship lines believe there will be opportunities to transport Covid-19 vaccines – but there are challenges to consider, writes Willis Towers Watson’s Thomas Stubler
The lucrative prospect of transporting Covid-19 vaccines by sea has intensified the spotlight on the maritime industry’s cold supply chain and its ability to carry high-value pharmaceuticals.
At present, speed to market is critical to stemming the spread of the pandemic, so the vaccines are being shipped by air to international destinations. Delivering them by sea is a longer-term strategy.
While the majority do not expect Covid-19 vaccines to be carried by sea soon, there are some container lines, particularly those with established ‘cold chain’ infrastructure, partners and expertise, who believe opportunities could materialise before the end of the year.
Some lines already moving other vaccines believe sea transport will become ‘relevant’ to the Covid-19 variety as soon as the volume outputs from manufacturers become more predictable.
Pharmaceutical shipments have slowly migrated to the sea for the past 20 years as confidence grew in the quality and security of the marine ‘cold chain’; for example, AstraZeneca, one of the makers of Covid-19 vaccines, reportedly increased the proportion of pharma products it ships by sea from 5% in 2012 to nearly 70% in 2017.
Because vaccines are volatile and valuable, it follows that their owners will prioritise using experienced cold-chain carriers to get their products to market. The Pfizer-BioNTech vaccine, for example, must be consistently stored at -70°C, or it will be rendered unusable.
Because the Covid-19 vaccines are highly valuable and potentially volatile, insurance contracts need to be carefully constructed to respond to the characteristics of each shipment. Standard limits to liability established by national regulatory bodies are likely to fall short of shipment valuations and, as there is no standard global template to limit liability, it is important that each policyholder shares their unique risk profile to establish the limits of the policy prior to its inception.
Limits of liability are typically established according to the maximum value of the carrying conveyance, with the onus on the policyholder to provide proof. Insurers will generally provide limits up to the value of the cargo transported and most pharmaceutical companies have large insurance limits, which can be subject to limits on accumulation and can be substantial.
The vaccines’ retail price has been estimated by some manufacturers at US$20-25 per dose. With the World Health Organization expecting up to 25% of the vaccines to be ruined every year due to poor temperature control, it is easy to see how the financial risks could rise considerably for all parties.
Also, because cyber attacks are a real risk for such socially vital cargo, all parties should ask whether standard marine cargo policies would respond to an attack that damaged their vaccine consignment.
Many marine cargo policies have multiple cyber exclusions that could rule out compensation for loss, damage, liability, or expenses stemming from an event with ’malicious intent’ to cause loss, whether directly or indirectly.
Also, ‘exclusion’ is a very broad term that is widely used in dedicated cyber policies, so insureds would be wise to ask whether their marine cargo policy would protect them in the event of shortfalls brought about by any cyber-exclusion language.
In today’s market, marine insurers will want more details about most of the links in their client’s supply chain and its third parties, before underwriting. These questions could include:
Clearly, any marine cargo insurance policies – even for experienced pharmaceutical carriers – will need to be re-examined to ensure they will respond to the risks inherent in carrying these precious goods.
Thomas Stubler is pharma industry cargo lead at Willis Towers Watson
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