VIEW: On the emerging insurance implications of the Suez traffic jam

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.

Download as a PDF

Misplaced your login for magazine content? Request a reminder.

    Share Story:

Recent Stories

Financial institutions were early adopters of cyber security and insurance. Are they still on top of the game?
Managing huge amounts of sensitive data online makes financial institutions a prime target for hackers. As such, the sector was an early cohort for insurers in creating cyber cover. Since then, the market has evolved almost beyond recognition. It continues to challenge itself to this day, complying with rigorous regulatory demands and implementing avant-garde enhancements to keep abreast of the ever-changing risks. Published June 2021

Manufacturing: An industry at risk amid great technological change
Of the many sectors of business, manufacturing companies are among the most at risk from cyber threats. How has the sector evolved to make it so vulnerable and what does the task of managing cyber exposure in a manufacturing company look like? CIR’s latest podcast with Tokio Marine HCC sought to answer all these questions and more. Published April 2021