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Chris Demetroulis, managing director of the transportation practice at Gallagher, details some of the biggest risks that supply chains face today, and how the insurance market is responding.
The slew of disruptions currently plaguing global supply chains has forced businesses and countries into a “wait-and-see mode,” Demetroulis says, as they struggle to respond to unforeseen events.
Amid economic uncertainty and growing geopolitical tensions, cargo theft is on the rise, he says. What’s more, it’s becoming increasingly sophisticated. GPS tracking allows thieves to determine the most advantageous point at which to strike. At the same time, cyberattacks are infiltrating companies’ information systems.
Insurance carriers, for their part, are responding by investing in former FBI and police to bolster their staffs and increase their ability to stay ahead of criminals. “It’s tough to keep ahead of it,” Demetroulis says.
Not surprisingly, companies are submitting a growing number of business-interruption claims, although for the most part, insurers don’t pay off on cargo delays. Exceptions might be in cases where the insured company has taken steps to project their cargo, physical facilities, and systems. It’s vital to understand where one’s suppliers are located, as well as alternatives buyers can turn to when supply lines are cut off.
In the face of such threats, insurance carriers are raising premiums and ratcheting down their coverage amounts. Whereas a single insurance company might have allowed a $50 million ceiling on payouts a decade or more ago, now they’re slashing that amount to single digits and relying on consortia of four or five carriers to spread the risk around. “Gone are the days of high limits without qualifications,” Demetroulis says.
Technology can help businesses to get a handle on supply chain disruptions, and mitigate risk. Predictive analytics provide a better understanding of critical information such as the location and status of drivers, and where the biggest risks within supply chains lie.
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