Companies that rely on international trade are looking to the insurance industry to provide new products that will better protect them. Credit: (EvrenKalinbacak/Adobe Stock)
Still smarting from the memory of the breakdown of the global supply chain triggered by the Coronavirus, businesses heavily linked to world trade are nevertheless upbeat about their prospects in 2024.
A full 82% of exporters that responded to the Allianz Trade Global Survey 2024, for example, said they're looking for an upturn in business throughout the rest of this year.
And nearly 40% of those surveyed — 3,000-plus companies from the U.S., U.K, China, France, Germany, Italy, Poland and Spain — forecast that boost topping 5%.
"Supply chains have generally recovered from the pandemic, and they've adjusted to a new normal," says Eric Jones, global manager, business risk consulting, FM Global.
Specifically, Jones indicates many companies have modified their supply chain strategies by increasing diversification, having more multi-supplier arrangements for critical products, and establishing additional local options for key materials.
Ana Boata, Allianz' head of economic research and lead writer on the Allianz report, found similar murmurings among the businesses her study surveyed.
But while a full 53% of business polled indicated they're considering supply chain utilization changes, Boata finds fewer are actually moving ahead with those changes.
Besides making supply chain modifications on their end, businesses (73%) are also looking to the insurance industry to provide new products that will better protect them from catastrophes — especially when it comes to uncertainty triggered by political storms and protectionism, according to Boata.
Those businesses (31%) are also uncomfortable about transport risks and listed those risks among their top three concerns for 2024, according to Boata.
"Political uncertainties and transport risk through specific channels remain a high concern," adds Joshua Landau, president, International Insurance Society.
Cindy Prudhomme, a senior manager at H.W. Kaufman Group, also notes the risk of political tension to global businesses. "With the world seeing so much turmoil right now, including the political uncertainty and potential volatility in the U.S., there are threats everywhere," Prudhomme says. "From the kidnapping of key executives and innovators to transportation threats and piracy, to wars in multiple regions and the civil disruptions in many countries that can shut down manufacturing and services, businesses must choose carefully where and how they conduct their businesses, in order to keep their output flowing."
Risks associated with input shortages, financing and non-payment also are on the radar of businesses intricately interwoven in the global supply chain.
"Whether it's a natural disaster, a transportation issue or a supplier failure, it's crucial for businesses to have a robust plan to protect against unexpected circumstances that could lead to business disruptions and create financial risk," says Kevin Nolan, head of multinational at The Hartford.
Overall, vulnerabilities that lack clear coverage options from insurers — or worse, no current perceivable coverage at all — are among the greatest challenges businesses will face in the next four years, according to the 2023 Global Supply Chain Risk Report from WTW.
It's a perspective that's echoed in a WTW and Lloyd's 2024 survey, "On the Move: Rethinking Transportation and Logistics Supply Chains."
That study found that businesses operating at the very core of the global supply chain — transportation and logistics companies — are seeking a raft of new insurance products to help them sidestep world- and region-shaking emergencies.
High-up on that list of 120-plus companies surveyed is an end-to-end supply chain risk policy, which would essentially offer A-Z coverage throughout the entire freight journey, according to study researchers.
Plus, those companies are also looking for coverage when dealing with suppliers rated at Tier 2 or below, according to researchers. Currently, there are too many unknown risks associated with such suppliers, according to the study.
Coverage for risk associated with transportation mode changes, such as when cargo leaves a facility or stops in transit from warehouse to warehouse, also is on the agenda for transportation and logistics companies, according to the study.
Plus, freight forwarders in the transportation industry are looking for trade disruption insurance that is specifically designed for their industry.
The solution from insurers? increasing numbers of insurers are in fact coming out with new coverage to handle such risk, including disruption insurance and trade credit insurance, says L. Pat Stoik, executive vice president, Ascot Group.
Plus, insurers are creating new kinds of policies for businesses seeking catastrophic coverage if they are willing to have frank, detailed discussions with insurance companies about how their businesses and industries work.
"The most effective risk management programs result from insurers, buyers and brokers partnering to identify all the risks faced by a company and developing strategic plans for mitigating and managing those exposures," says TJ Richter, an executive underwriter at Liberty Mutual.
Mike Falvey, CEO, Falvey Insurance Group, agrees.
"Access to real-time data and analytics enables insurers to better understand and assess risks, develop more tailored insurance solutions and provide proactive risk management services to businesses," Falvey says.
In practice, being able to drill down for data and insights would translate into greater insurer access to comprehensive business software programs designed to run entire businesses — such as Enterprise Resource Planning (ERP) platforms.
With that kind of microscopic look at data and insights, insurers would be in a much better position to identify, assess, mitigate and protect businesses when the catastrophic occurs, according to study researchers.
For example: The study's researchers point to Loadsure, an automated insurance underwriting system, which offers a deep-dive into the freight industry's data and business insights, and is used by freight bookers throughout the global supply chain.
Designed by experts in the insurance and transportation industries and driven by artificial intelligence, Loadsure can come-up with a premium for a specific shipment on a specific day and traveling via a specific kind of transport in under a minute, according to the researchers.
Loadsure's secret: Decades of industry data and insights based on similar kinds of shipments, which is enhanced in real-time as new insurance business is booked on the system. That, in turn, triggers evermore data and insights about the industry.
Another example of insurance coverage made much more possible resulting from an in-depth look at a specific industry is ClearTrac, according to the researchers.
It's system for the trucking industry, which offers a real-time view of the risk associated with specific trucking fleets — and even specific truck drivers — according to researchers.
Designed by Scott Grandys, president, ClearConnect Solutions — who has years of experience in transportation, freight and final mile businesses — the system yields its insights on freight-via-trucking risk by using data and analysis drawn from a mix of trucking monitoring services, telematics, and in-cab monitoring of individual trucks.
The result: By consulting the ClearTrac system, insurers are able to provide accurate scoring regarding a shipper's risk of going with any particular trucker, according to the study's researchers.
Both systems are of course a great start in the migration to deeper insurer access into the day-to-day data and analytics of businesses.
But moving forward, Danish Yusuf, CEO, Zensurance.com, says insurers will probably be able to get more businesses to cotton to the idea of trading their company data and company insights if the insurers, in turn, offer cooperating businesses better rates that other businesses that prefer not to offer such deep access to their day-to-day business.
"For example, more agreeable premiums for businesses to cover such events and improved risk assessments and recommendations to lower their overall exposure could prove helpful," Yusuf says.
Freelance contributor Joe Dysart is an Internet speaker and business consultant based in Manhattan. He can be reached by sending an email to joe@breakingnewsintech.com.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.