Nearly 19,000 vessels passed through the Suez Canal last year, carrying around 12% of global trade. Therefore, the closure of the canal for six days in March during the stranding of the ULCV Ever Given was a global news story from the start. But over a month later, the insurance consequences of this story are only just beginning to become visible.
The Ever Given itself has been detained in Egypt pending settlement of a US$1bn claim for compensation made by the Suez Canal Authority. But for supply chain managers and their insurers everywhere, in the long-term, this incident may come to be remembered for something other than its impact on the marine market. Much more significantly, it seems that for many, the impact of coronavirus on stocking and shopping habits, followed by the Suez Canal closure, has been a trigger for the rethinking of supply chain planning and inventory control. The impact has been especially marked in a year when pressure around climate change became markedly higher. According to Dun & Bradstreet, procurement managers are highly concerned about ESG issues, and their influence on supply chain planning.
Last month global shipping giant Maersk’s chief executive told investors that the disruption from the Suez closure would cause companies to move away from just-in-time supply chains and towards keeping much higher inventory levels; a tectonic shift which will impact insurers hugely. Firstly, the impact will be felt in terms of values as stock in warehouses surges, and corporate risk shifts towards inventory and storage instead of just-in-time and transport risks. Secondly, the lever that many firms will use to tighten their supply chain planning will be technology. With an amazing 98% of procurement professionals struggling with supplier data management, cyber risks must also be considered a growing risk.
For insurers, the lesson is clear. Use the supply chain shocks of 2021 as a trigger to review exposures. For risk managers, the call to action is also loud. While change may be traumatic for all, perhaps the outcome of this year of change will be a more resilient supply chain, and one where risks are better identified, and perhaps even better insured.
This article was published in the May-June 2021 issue of CIR Magazine.
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