July 9, 2024 • 39 mins
Freight insurance has become more important for shippers given increased geopolitical, environmental, economic and emerging risks facing supply chains. In this Talking Transports podcast, Shannon Schmidt, Nacora International Insurance Brokers’ president of North America, joins Lee Klaskow, Bloomberg Intelligence senior transportation and logistics analyst, to share her insights on an often overlooked part of international trade. The global marine cargo insurance market is expected to grow at a compounded annual growth rate of 5.9% to $34 billion between 2024-32, according to Astute Analytica. Schmidt breaks down the insurance implications of the crisis in the Red Sea and the collapse of Baltimore’s Frances Scott Key Bridge in March. Nacora is a division of freight forwarder Kuehne + Nagel.
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Speaker 1 (00:07):
Hi everyone, and welcome to Bloomberg Intelligence Talking Transports Podcast.
I'm your host, Lee Klascal, senior freight transportation logistics analysts
at Bloomberg Intelligence, Bloomberg's in house research arm of almost
five hundred analysts and strategists before diving in little public
service announcement. Your support is instrumental to keep bringing great
guests onto the podcast, like the one we have today.
(00:29):
If you haven't already, please do take a moment to
follow rate and share the Talking Transports Podcast with your friends.
We appreciate your support. I'm very excited to have Shannon Schmidt,
Nicora International's North American president. Nicora is a division of Kunanagal.
Kunanagle is one of the largest freight forwarders in the world.
(00:50):
In trades under the ticker knin space SW on the
Bloomberg terminal. The company has a market cap around thirty
five billion. Welcome to the Talking tan Sport Podcast. Shannon Hiley,
It's good to see you. It's been a while. I
think last time we saw each other was in Philadelphia
at the Health and Personal Care Logistics Conference.
Speaker 2 (01:09):
Absolutely, yes, it's been a minute, but good to see
you again.
Speaker 1 (01:13):
It's good to see you as well. So why don't
you tell folks a little bit about you and Noicora?
Speaker 2 (01:20):
Sure? So, I have been with Nicora for the last
four years. I started in July of twenty twenty. Prior
to that, I was with our parent company of kunan
Ogle and I've been with the organization as a whole
for going on thirteen years. My background is a little
(01:40):
bit unusual for the insurance space. I actually started out
in logistics and transportation right out of college and was
in that space up until the time that I joined Nicora.
So Nicora was my first foray into the insurance world
and it has been a really exciting and enjoyable ride,
i have to say, and just really excited to be
(02:04):
on the side of the business.
Speaker 1 (02:06):
And can you talk a little bit about nkor, like,
you know, where are you positioned. Why does kuninagal have
an insurance division?
Speaker 2 (02:15):
Sure? So, physically I'm positioned in the US. I'm responsible
for North America. As you mentioned earlier, We're headquartered in Shindealigi, Switzerland,
actually in the same building as kunanagal Ag. We were
founded in nineteen seventy two by Kunanagle, so we are
(02:35):
completely homegrown. We started in Canada in that year and
today we have offices in over thirty countries, with like
I mentioned, our head office being in Shindoligi, which is
near Zurich. Given our heritage and the transportation industry, we
have a strong specialty in the design and management of
(02:56):
cargo insurance solutions, but we also offer a widespec of
insurance solutions that include things like cyber insurance, commercial general liability,
property insurance, and so on and so forth.
Speaker 1 (03:09):
And you guys, are your customers go beyond just Kudinogle customers. Correct.
Speaker 2 (03:14):
Absolutely. While we do business with Kunanagle and with the
other companies that fall under the Kunanogle group, we have
our own group of customers as well, and we primarily
are B to B so our core competency is to
support companies of all sizes in the design and building
of cost effective commercial insurance programs, which includes risk consulting
(03:40):
commercial insurance solutions.
Speaker 1 (03:43):
One of the reasons why I want to have you
on is that we're on a panel together. And don't
take this personally, but I was like, wow, insurance is
a lot more interesting than I thought it was going
to be. You had a lot of great points because
there's so much craziness going going on in the world
where you know, risks are increasing, and you know, proper
(04:04):
insurance is obviously becoming more and more important for companies.
It's obviously some a risk that, you know, something that
people were trying to diminish the risks of all the time,
but it seems like more and more importance with the
crisis and the Red Sea. Can you talk about the
insurance markets where are we today? How has that changed since,
you know, since the chaos going on the Red Sea?
Speaker 2 (04:27):
Maybe even like.
Speaker 1 (04:28):
What did the pandemic do? Did change insurance? Just talk
about the insurance market for the marine shipping industry.
Speaker 2 (04:36):
Sure, So I'm actually going to go back even a
little further beyond the pandemic and just point out that
marine cargo insurance is actually the oldest form of insurance
in the world. It was started in the thirteen hundreds.
That's the first policy that was recorded, and actually there's
evidence that it could even be before BC at this point,
(05:01):
so not really sure. Of course, the Phoenicians had some
data from back in the day about some early early recordings,
but it's really a fascinating industry. So kind of fast
forwarding back to your question of the market today. In
(05:24):
twenty twenty three, the market was about twenty point eight
billion US dollars of premium for the insurance market, and
we're expecting that to grow to about thirty four billion
dollars by twenty thirty two. There have been ebbs and
flows obviously with that, because with the pandemic, we did
(05:45):
see quite a bit of a diminished market in that
year based on the fact that trade had just sort
of completely stalled at one point. In the years after
twenty twenty, we saw a huge boom as people who
were kind of trapped in their house for the quarantining
(06:07):
and so on and so forth, we're buying things. There
was a lot of purchases being made by the end
consumer that we're leading to a lot of increases in
the transportation industry. So we saw our market, at least
in the marine cargo space begin to increase, and interesting
also in the property space for commercial businesses in their
(06:27):
warehouses also we saw boom in the market there as well.
So the reason that we are now seeing going forward
from twenty twenty three an increase in the market is
because of two main factors. Number One, global trade is
continuing to increase, and that's the biggest factor. And then secondly,
(06:50):
because of a lot of the environmental and when I
say environmental, I will go into that here shortly, the
larger environmental scale of things, companies have paid a lot
more attention to the benefits of insurance overall and their
risk supply chain risk management strategy, largely in part to
(07:10):
the fact that just you know, last year, over three
hundred and eighty billion dollars worth of goods were lost
globally just due to natural disasters and other environmental calamities.
So as you can see, with the increase of certain
risks that are out there, companies are really standing up
(07:33):
and paying more attention to how to expand their supply
chain risk strategy to better encompass insurance as a solution. Wow.
Speaker 1 (07:43):
And is that three hundred and eighty billion dollars Is
that just on the water or that's just globally like
it could be going to were ahouse the tornado rips up.
Speaker 2 (07:51):
That's globally for any form of transportation, so land air ce.
Speaker 1 (07:56):
Wow, that's that's incredible. And then also you know earlier
you may that you see the market growing to thirty
four billion by twenty thirty two. So is that the
marine cargo insurance market you were talking about specifically, So we.
Speaker 2 (08:09):
Speak about marine cargo insurance, it's actually a little misleading.
Marine cargo insurance actually is all forms of transportation. So
even though we refer.
Speaker 1 (08:18):
To the word marine, you're blowing my mind right now.
Speaker 2 (08:21):
Yeah, and it incorporates all air road and see, yes.
Speaker 1 (08:25):
That's good to know. And you know, I guess the
market you say is increasing. So is that because people
are buying more and more coverage or because rates are
going up? What's driving that large increase from twenty point
eight billion to thirty four billion by twenty thirty two.
Speaker 2 (08:45):
There's a few factors that are going into that. Number One,
if the cost of transportation itself increases, the premium organically
also increases. And the reason for that is because when
a company purchases marine cargo insurance, they are covered for
the cost of the goods themselves, the freight that they're purchasing,
(09:07):
if they had to pay any duties or taxes to
end of the country that they're coming into, plus ten percent.
So as the cost of freight increases, the premium automatically
increases as well. Because the purpose of insurance is to
make a company whole. So in part it is due
to freight increasing itself. It's also due to the freight
(09:33):
is increasing because of factors that are outside of the
insurance market, obviously supply and demand when it comes to
the equipment itself. But the market is increasing because of
the freight costs are increasing. In addition to that, with
global trade increasing, the market's also increasing with that. So
(09:56):
the more customers are importing, exporting moving goods within their
own entries and so on and so forth, that isn't making
the market increase. And then the greater attention to insurance
itself as a solution for supply chain risk mitigation strategy.
Speaker 1 (10:14):
Right, And so I guess the large increase that we've
seen in liner rates this year have had a positive
impact on insurance rates going. When I say positive impact,
I mean from your standpoint, not maybe from the buyers standpoint.
So insurance is going to be more expensive because of that, sure,
And I.
Speaker 2 (10:34):
Like to tell our customers because of the increases in
the freight costs, even more important is it to have
insurance because it's protecting that investment of the freight itself
and not just the value of the cargo. So with
the greater investment that they're making in the transportation of
the goods, becomes more of a reason to have the
(10:56):
insurance on the cargo as well.
Speaker 1 (11:00):
You know, because conan Ogle does all surface difference. You know,
they do surface, they do air, they do ocean forwarding,
they kind of they kind of do it all. When
you know, in the insurance market, is is there much
difference for air cargo versus ocean cargo in terms of
either the market or the nuances of the insurance. I mean,
(11:23):
you know, get as wonky as you need to.
Speaker 2 (11:25):
Here, sure, So, I mean the vast majority of the
cargo that's insured is moving on the water. It also
is a riskier form of transportation because there are more
handling points. There's also a longer transit. With a longer
transit comes more risk. So air freight rates typically are
(11:47):
significantly less than the other modes of transportation. Road typically
has the highest rates in the marketplace, mainly because there
is the most risk associated with that mode of insportation.
Speaker 1 (12:01):
And is that risk people stealing stuff or just accidents
on the highways.
Speaker 2 (12:05):
It's really all of the above. It's it's theft. It's
the fact that you know, there's there's accidents on the
roads every day. There are natural disasters like tornadoes and
wind and rain and lightning and other things that can
befall a truck driver. Sometimes we've run into situations where
(12:27):
there's organized crime related to the truck drivers themselves. So
there's all kinds of different factors that go into road
that aren't necessarily applicable to the air and the EC space.
Speaker 1 (12:41):
Yeah, I find that the conferences that I go to
in the industry, people that I speak to, how more
and more theft is kind of bubbling up to kind
of some of the biggest issues facing the industry, especially
as it relates to trucking. So that's that's pretty interesting.
And we've seen truck rates here in the US go
up very very much so in the last couple of years.
Speaker 2 (13:05):
Absolutely, and I feel like I'm doing a disservice to
the transportation solution of rail by not mentioning it. But
also rail is another area where we've seen a huge
spike in theft, particularly on the West Coast in the
last couple of years. We've seen a lot of pillaging
of those containers that are moving on the rail there
(13:27):
as well. So that's another area that's quite risky when
it comes to especially theft.
Speaker 1 (13:33):
And so you know, you're mentioning that trucking insurance tends
to be more expensive than ocean, which tends to be
more expensive than air. Is rail in between trucking and
ocean in terms of the cost of insurance.
Speaker 2 (13:46):
Rail will typically fall somewhere in the realm of the
truck rates when it comes to insurance.
Speaker 1 (13:54):
Oh okay, great. So when we were on that paddle
in philadel you kind of like really educated me on
a couple of things. One of those things was general average,
you know, and that came up because of what happened
with the Baltimore bridge collapse. Can you talk or educate
(14:17):
the listeners here what general average is and kind of
its impact on the situation down in Baltimore?
Speaker 2 (14:25):
Sure? So, General average is an old, ancient maritime law
that began hundreds of years ago because there was a
need to create some protection for the steamship lines in
the liability that they may have there are Back back then,
(14:49):
there were so many situations where it was unsafe waters
or wind or something along those lines, and they may
have to they being the crew may have to jettison
some cargo over the rail of the ship in order
to keep the crew safe to make the journey, and
there are a lot of factors that would go into that.
(15:11):
The crew would have to do what they had to
do to keep them some safe, to keep the ship safe,
and to get the vast majority of the goods to
where they're going. Over time, that's evolved. Obviously there's a
lot more factors that go into the movement of goods today,
but the sentiment of the idea of general average remains
(15:33):
the same. How it works is it just basically says, hey,
the steamship line shouldn't have to take on the burden
of this cost on their own. If something happens between
point A and point B on the journey of this vessel,
if we have to jettison cargo, or if the say,
for example, ship runs aground or gets stuck in the
(15:55):
Suez Canal, or I'm just thinking of some other things
that have happened to over the years recently, then everyone
on the ship who has stake in this cargo is
going to pitch in and they are going to help
cover the cost of whatever has happened. There is a liability.
(16:16):
I shouldn't use the word liability in this case. There
is a responsibility of the steamship line to actually declare
general average, and what that would require is that there
isn't a gross negligence on the part of the steamship
line in declaring this before they do that. So perfect
(16:37):
example of where that may not work and we're waiting
to see is the Baltimore Bridge situation. So, Lee, I'm
sure you've gotten your listeners up to speed with what happened,
but just in case somebody's tuning in for the first time,
I'll kind of explain it. So in late March, the
vessel named the Dolly struck Francis Scott Key Bridge in Baltimore,
(17:03):
and because of that, there was a destruction of the
bridge itself. There were six road workers who were killed
when the vessel struck the bridge. There was damage to
the ship itself, there was cargo that was damage based
on the bridge falling on the ship, and as you
(17:24):
can imagine, this was just a huge disaster when it
comes to lots of different things, death, destruction of the bridge,
the ship, and the cargo. So there have been investigations
from the time that this happened. As to why did
this happen, the ship owner has declared general average, but
(17:50):
there is an investigation that is going on today by
the National Transportation Safety Board, and that's been an ongoing
investigation since the time that happened. They just released a
report on Monday that the reason that the ship did
crash into the bridge is because there was a blackout
(18:14):
because there were two breakers that were tripped unexpectedly right
before the vessel crashed into the bridge. It was there,
estimating about three ship links distance between where the vessel
was at that point and where the bridge was was
when that happened. Interestingly, there also were two blackouts the
(18:34):
day before, and what they found out was that one
occurred because a crew member mistakenly blocked the generator's exhaust
gas stack, and the second occurred because of insufficient fuel
pressure on the ship. So it's been a really interesting
journey to kind of find out what really is going
on here, and of course the vessel owner does not
(18:57):
want to have the liability for that. Just the construction
of the bridge itself, the cost of that is estimated
to be right around one point nine billion dollars just
to rebuild that ship. Or I'm sorry that bridge. Then
of course there's the damage to the ship, like I mentioned,
the cargo itself, and then the families of these six
(19:19):
road workers are going to be looking for some legal
restitution as well. So it's going to be I think
a long journey to find out whether or not General
Average will will actually stick on this one, because there's
some finger pointing going on. Interestingly, this was chartered by
(19:44):
Marisk steamship Line as well, so was not their vessel.
They chartered the vessel from the ship owner who owned
the Dolly, so there's a few fingers pointing there as well.
So it's a really dynamic story that's continuing to evolve,
and I definitely encourage everyone to continue to stay on
top of how that's looking because if General Average does
(20:08):
remain in play, this could be very expensive for those
who had cargo.
Speaker 1 (20:13):
On that vessel, right, And so obviously it sounds like
this is going to be held up in the courts
for a long time before a final decision or is
going to be made. But if General Average were to
come true, if I understand the explanation of it, that
means if you were a company and you had a
(20:35):
container on that ship, you'd be on the hook for
all the liability associated with the accident for a certain
percentage I would gather.
Speaker 2 (20:46):
What will happen is there'll be a dollar amount that's
released as the total amount that has been added up
based on all the different factors, and then they take
a look at who has what stakes. So in other words,
if the value of your goods equate to one percent
of whatever that dollar or whatever the total values are
(21:08):
prior to the accident, then you would be responsible for
one percent of whatever that dollar amount is that is
due to the accident. So the higher the value the goods,
the more containers a company typically has on a ship
at any given time, that will increase the amount that
they would end up paying in those situations.
Speaker 1 (21:30):
And this is the risk that people are mitigating with insurance, right,
So it's not necessarily the shipper is on the hook.
Their insurance company would be on the hook.
Speaker 2 (21:39):
Yes, And therein lies a lot of the reason why
more and more companies are taking a look at insurance
as a solution for supply chain risk. Even just a
few years ago, you talked to a company and they
may say, oh, we're self insured, and traditionally what that
means is a company has a rainy day fund for
whatever may happen when it comes to their supply chain,
(22:03):
if they've got a loss or if they have a
general average event or something like that. But as as
inflation continues to happen, as goods become worth more, as
accidents are occurring more frequently, and general average is being
declared more frequently, this isn't necessarily a great strategy for
(22:24):
companies to employ. And in the case of general average,
if they don't have an insurance policy on their cargo,
then they are actually on the hook to pay the
bond to the entity that is managing that so that
they can get their cargo released and be off the
hook for those charges. And then they wait and then
they wait to find out if there's any further adjustments.
(22:47):
So it's very very interesting and a huge risk for
those that are moving cargo on the water.
Speaker 1 (22:53):
I don't know if you have any stats, so I
might just be asking a silly question, roughly, what percentage
you think of the market is self insured and not
going through traditional insurance.
Speaker 2 (23:04):
You know, I've seen some statistics on it. I'm going
to hesitate to throw a number out today. Just because
they're kind of all over the place. But what I
will say is that the estimation is that there are
still more companies that are self insuring than companies that
are going with an insurance policy to cover their cargo.
Speaker 1 (23:23):
Wow, that's food for thought.
Speaker 2 (23:26):
You know.
Speaker 1 (23:26):
In the trucking insurance market, you know, we've seen a
lot of underwriters leave the market because it's just the
risks are too high and it's just not a good
business for them anymore. So the underwriters, the number of
underwriters are becoming smaller and smaller. Is that true in
the global marine shipping or the global air freight markets?
Speaker 2 (23:49):
We haven't seen that as much with the companies that
we do business with. We're very careful with the companies
that we work with. We make sure that they have
a good risk management strategy in and of themselves. We
want to work with companies that look very diligently at
the risks that they're taking on so that they are
(24:10):
well positioned to give very very comprehensive solutions to the
brokers that are out there. So I can't speak to
seeing that with the companies that we do business with,
but it has happened in the industry yes, okay, And.
Speaker 1 (24:28):
So have you been involved or any at all of
any of the ships being damaged in the Red Sea.
When I say you being involved, I know you're not
doing the damage. But like any of the companies that
you ensure, have they had any impact from the crisis
that's going on in the Red Sea?
Speaker 2 (24:45):
Luckily no, And at this point, given that the steamship
lines are all re routing around the Cape of Good Hope,
we're not really expecting to see that at this point.
Speaker 1 (24:58):
And you mentioned that, you know, insurance rates for ocean
or more expensive than the air because the longer voyage times,
and you know, because people are avoiding this as canal,
that's adding you know, call it anywhere between ten and
fifteen days. So I guess not only is insurance becoming
more expensive because the rates are increasing, but also because
(25:19):
the voyage times are increasing as well. Is that true?
Speaker 2 (25:23):
Yes, there is more risk the longer the transit. So
you know, typically what insurance companies will do, especially for
companies with policies, is they look at that once a
year unless there's a reason to do otherwise. For example,
war risk is a reason to do otherwise. So if
a company is at in jeopardy of having an issue
(25:46):
when it comes to geopolitical tensions or war, the insurance
companies will do an adjustment there, but otherwise not seeing
necessarily a spike in insurance on the the regular rates
as of yet. Now, do we expect to see some
jump next year, yes, probably, but not double digit increases,
(26:10):
probably still in the single digits. And when I had
a conversation with the trade team at Kunanagul about what
they're expecting on the ce logistics side, I said, how
much of the increases that you're seeing on the freight
itself are attributed to this re routing to go around
the Cape of Good Hope, And they said, actually, it's
(26:31):
only about ten percent. The reason for that is because
now we're squarely in peak season from trans Pacific to
the US in particular, is what I'm speaking about. They
don't expect that to end until October. Beginning of October,
but there's going to be a tariff increase in August.
That's what's anticipated, and so a lot of companies are
(26:54):
actually trying to move their cargo and sorry August first,
and so we're seeing some supply issue as well. And
with that, the spot market has become a little interesting.
So there's all kinds of factors that go into it.
But from an insurance perspective, when the rates, we're seeing
(27:18):
the rates increase, it's really just the premium at this point,
and that's because the freight's going up.
Speaker 1 (27:24):
And so when you're talking to your clients, obviously geopolitical risks,
environmental risks, you're trying to ensure against what other large
risks are out there that shippers need to be aware
of when putting freight on the ocean or in the air.
Speaker 2 (27:40):
Sure, there's four main supply chain risks that I like
to put things into buckets. It is the geopolitical risk,
it's the environmental risk, there's economic risk itself. And the
emerging risk that's come out over the last couple of
years is the cyber risk. The reason for that is
(28:00):
I think fairly obvious, but as the world becomes more digital,
so does the maritime industry. And because of that, many
of the communication devices are Internet enabled, and because of this,
we're seeing more and more cyber threats, particularly at ports,
(28:26):
some airports as well. So it's some steamshiplines. Actually, we've
seen it with the steam steamshipline we've seen it with
the freight forward or so it is becoming a much
bigger risk for companies and so we've got our eye
on that and the market is adjusting for that as well.
Speaker 1 (28:43):
And so when you're ensuring for cyber risk a so
you're insured, are you talking about the freight itself is
being insured for cyberrisks? So if it's being held up
at a port because the cyber attack screws up a
portability to take containers off of a ship, then you're
being you're being insured for that or am I missing something?
Speaker 2 (29:04):
Yeah, Typically that's going to be that's going to be
a little bit different. So if there's delay because of
some peril that's happened in the in the movement of
the goods, if a company's cargo insurance policy has a
delay clause in it that allows for them to to
(29:24):
file acclaim against it, then that would cover that. If
the company themselves is not affected their their cyber capability
is not affected by that breach, it wouldn't there wouldn't
be any anything that would touch on that. But typically
cargo insurance it's not going to cover for any sort
of cyber threat that would be a separate policy.
Speaker 1 (29:46):
Gotcha understood? So you know your your your business is
dealing with risks. You know what keeps you up at
night in terms of you know your your your job,
in terms in terms of you know the thing that
concern you most about the industry.
Speaker 2 (30:03):
Yeah, I think it's just making sure that companies know
what they're up against and what those risks are. Because
the estimation on the number of companies globally that have
cargo insurance is so low. I want to get out
in front of as many customers as I possibly can
to kind of let them know what the full story is.
(30:24):
We have a lot of conversations with companies about why
not to bundle their cargo insurance into their typical business
and commercial policies, and why it's best to have a
standalone cargo insurance policy. So that could be a whole
nother podcast lead. So I won't time on that, but
(30:47):
that's the kind of thing that does keep me up,
and not in a bad way. Actually it is in
a good way. It excites me to have the opportunity
to talk to companies about how we can help them
create solutions and their supply chain risk management strategy that
include insurance and other facets that is going to keep
them from putting themselves in a position where they're financially
(31:08):
at risk because of decisions that are happening.
Speaker 1 (31:11):
And in your career on the insurance side, is there
one claim that were event that you saw that was
really like, was shocking to you for a good reason
or a bad reason, And you don't have to give
name names, just you know, kind of like an incident
that was, you know, out of the ordinary.
Speaker 2 (31:33):
One comes to mind. I don't know if i'd use
the word shocked, but I do think it's really interesting
and it's somewhat intricate as well. We had a company
that was importing some goods from Asia and the goods
were held at port because of a customs inspection. Because
(31:58):
they were held so long, then of course they incurred
detention and demurriage. Well really just more demerge because I
don't believe they were on uh with a truck driver
at that point, but demurriaged charges were adding up every
single day. The goods were sitting uh waiting, waiting, waiting, waiting,
(32:18):
and actually while they were waiting, come to find out,
a couple of containers actually had some holes in them,
and so the goods were actually getting damp, not soaked,
just damp when there was precipitation. And this customer lives
and kind of a is located in a subtropical part
(32:39):
of the US, and because of that heat and that moisture,
and of course just general humidity as a whole, it
created the perfect storm where this company is waiting for
their goods to be released. They're paying the demerriage because
the cargo is sitting in the containers. This is for months,
(33:02):
just as an aside, and then when they finally do
get the goods unloaded, they realize they're covered in mold.
The interesting part about this is that they had changed
their business model, and because they changed their business model,
they were moving more cargo on a vessel at a
(33:24):
time than they used to when they started their policy.
And because of that their policy, it was in between
their renewal periods when they decided to do this, and
they increase the amount of containers that were moving at
a given time. A typical policy will have a per
(33:44):
conveyance limit on it, so a certain dollar amount limit
per conveyance, whether that's an airline shipment or sorry, an
airline flight or a sea voyage, if they have X
amount of dollars on that voyage, then it caps out
(34:06):
at a certain dollar amount. Well, because this company had
made changes in their supply chain strategy between when they
renewed their policy and when they were up for renewal again,
the amount of containers that were on that vessel, the
value exceeded what their per occurrence limit was. So because
of all this, it's sort of the perfect storm. Because
(34:29):
of all this, as you can imagine, they had well
over the amount of value on that specific conveyance that
would have been ordinarily covered based on their policy. So
there are a lot of interesting facets on that one.
And so I do encourage companies to if you're planning
(34:51):
on making any changes in your supply chain strategy, or
if you are not reviewing your insurance policy right regularly
to see what those limits are to make your insurance
provider aware. I would encourage any listener to do that,
because it's really important to have a good understanding of
(35:11):
what that policy will cover when you're strategizing on how
to move the goods. And I think the most interesting
part about that is what we find nine times out
of ten, maybe even more times than that is that
the supply chain and logistics team, they aren't negotiating necessarily
(35:32):
their cargo insurance policy. So if it's a CFO, if
it's somebody illegal or compliance, it depends on the company's
strategy with that. They may not know when they're making
a change in the supply chain strategy and it may
not match any longer with what the policy looks like.
So that's the most interesting thing that I've run across,
(35:54):
and I've seen it time and time again. Not necessarily
with our customers because we try to do quarterly review
use with our customers to make sure that we aren't
overlooking something alongside them. But that is something I highly
encourage companies to do, is just look, just understand it,
just know what it says.
Speaker 1 (36:13):
So I was scarious with that example. So if there's
holes in the container, is the owner of the container
responsibility for the damage?
Speaker 2 (36:22):
So what typically a policy will state is that when
the cargo is being loaded, if the container is not
sufficient for the journey, they should reject the container and
request a new one.
Speaker 1 (36:36):
Gotcha, Okay, very good. So when you're not slinging insurance,
what do you do for fun?
Speaker 2 (36:41):
Oh Man? All kinds of things. We actually we love
to travel our family. We love to just go. So
we just got off a cruise ship on Saturday with
a Disney cruise. Not sure if I can say the brand,
but I'm going to say it anyway. We were all
over the Western Caribbean, and prior to that, we were
(37:02):
in kind of the Mothership in Orlando as well, spending
some time there. So that's one of our favorite things
to do is to travel. We've got big plans to
hit all the Seven Wonders of the world. We want
to see all the Disney parks together as a family,
So that's that's a big thing we like to do.
And then, of course I've got two teenagers and one
(37:24):
of which just got our driver's license, which is a
huge relief for me because up until this week I
was shuttling them to all their places. That was one
of my hobbies.
Speaker 1 (37:36):
I know the feeling all too well about that. Well,
hopefully you get to all seven Wonders. Have you gotten
to any of them yet?
Speaker 2 (37:43):
Yes? I have. I've gotten to one. At this point,
I was very close to the second one. I've been
to the Great Wall, and I had the opportunity to
go to to Loom, but I'm sorry to teach Younitza
but instead I went to Tuloom. So we're going to
have to get the family to teaching needsa together and
(38:04):
then hit the rest of them as well.
Speaker 1 (38:06):
Well. It's great to have a bucket list and Channa
and I really want to thank you for your time.
I find these conversations fascinating. I like insurance. Insurance is
very interesting. My first job in inequity research was I
worked for a property and casualty teams as a junior,
so that was fun. Got my toes wet and insurance there.
Speaker 2 (38:29):
So thanks for coming absolutely and thanks for having me.
Speaker 1 (38:32):
It's been a pleasure, and I want to thank you
for tuning in. If you like the episode, please subscribe
and leave a review. We've lined up a number of
great guests for the podcast. Check back to hear conversations
with C speed executives, shippers, regulators, and decision makers within
the freight market. Also, if you have any ideas for
a future episode, please hit me up on the Bloomberg
(38:53):
terminal or at Twitter at logistics Late. Thanks everybody, and
take care
Hi everyone, and welcome to Bloomberg Intelligence Talking Transports Podcast.
I'm your host, Lee Klascal, senior freight transportation logistics analysts
at Bloomberg Intelligence, Bloomberg's in house research arm of almost
five hundred analysts and strategists before diving in little public
service announcement. Your support is instrumental to keep bringing great
guests onto the podcast, like the one we have today.
(00:29):
If you haven't already, please do take a moment to
follow rate and share the Talking Transports Podcast with your friends.
We appreciate your support. I'm very excited to have Shannon Schmidt,
Nicora International's North American president. Nicora is a division of Kunanagal.
Kunanagle is one of the largest freight forwarders in the world.
(00:50):
In trades under the ticker knin space SW on the
Bloomberg terminal. The company has a market cap around thirty
five billion. Welcome to the Talking tan Sport Podcast. Shannon Hiley,
It's good to see you. It's been a while. I
think last time we saw each other was in Philadelphia
at the Health and Personal Care Logistics Conference.
Speaker 2 (01:09):
Absolutely, yes, it's been a minute, but good to see
you again.
Speaker 1 (01:13):
It's good to see you as well. So why don't
you tell folks a little bit about you and Noicora?
Speaker 2 (01:20):
Sure? So, I have been with Nicora for the last
four years. I started in July of twenty twenty. Prior
to that, I was with our parent company of kunan
Ogle and I've been with the organization as a whole
for going on thirteen years. My background is a little
(01:40):
bit unusual for the insurance space. I actually started out
in logistics and transportation right out of college and was
in that space up until the time that I joined Nicora.
So Nicora was my first foray into the insurance world
and it has been a really exciting and enjoyable ride,
i have to say, and just really excited to be
(02:04):
on the side of the business.
Speaker 1 (02:06):
And can you talk a little bit about nkor, like,
you know, where are you positioned. Why does kuninagal have
an insurance division?
Speaker 2 (02:15):
Sure? So, physically I'm positioned in the US. I'm responsible
for North America. As you mentioned earlier, We're headquartered in Shindealigi, Switzerland,
actually in the same building as kunanagal Ag. We were
founded in nineteen seventy two by Kunanagle, so we are
(02:35):
completely homegrown. We started in Canada in that year and
today we have offices in over thirty countries, with like
I mentioned, our head office being in Shindoligi, which is
near Zurich. Given our heritage and the transportation industry, we
have a strong specialty in the design and management of
(02:56):
cargo insurance solutions, but we also offer a widespec of
insurance solutions that include things like cyber insurance, commercial general liability,
property insurance, and so on and so forth.
Speaker 1 (03:09):
And you guys, are your customers go beyond just Kudinogle customers. Correct.
Speaker 2 (03:14):
Absolutely. While we do business with Kunanagle and with the
other companies that fall under the Kunanogle group, we have
our own group of customers as well, and we primarily
are B to B so our core competency is to
support companies of all sizes in the design and building
of cost effective commercial insurance programs, which includes risk consulting
(03:40):
commercial insurance solutions.
Speaker 1 (03:43):
One of the reasons why I want to have you
on is that we're on a panel together. And don't
take this personally, but I was like, wow, insurance is
a lot more interesting than I thought it was going
to be. You had a lot of great points because
there's so much craziness going going on in the world
where you know, risks are increasing, and you know, proper
(04:04):
insurance is obviously becoming more and more important for companies.
It's obviously some a risk that, you know, something that
people were trying to diminish the risks of all the time,
but it seems like more and more importance with the
crisis and the Red Sea. Can you talk about the
insurance markets where are we today? How has that changed since,
you know, since the chaos going on the Red Sea?
Speaker 2 (04:27):
Maybe even like.
Speaker 1 (04:28):
What did the pandemic do? Did change insurance? Just talk
about the insurance market for the marine shipping industry.
Speaker 2 (04:36):
Sure, So I'm actually going to go back even a
little further beyond the pandemic and just point out that
marine cargo insurance is actually the oldest form of insurance
in the world. It was started in the thirteen hundreds.
That's the first policy that was recorded, and actually there's
evidence that it could even be before BC at this point,
(05:01):
so not really sure. Of course, the Phoenicians had some
data from back in the day about some early early recordings,
but it's really a fascinating industry. So kind of fast
forwarding back to your question of the market today. In
(05:24):
twenty twenty three, the market was about twenty point eight
billion US dollars of premium for the insurance market, and
we're expecting that to grow to about thirty four billion
dollars by twenty thirty two. There have been ebbs and
flows obviously with that, because with the pandemic, we did
(05:45):
see quite a bit of a diminished market in that
year based on the fact that trade had just sort
of completely stalled at one point. In the years after
twenty twenty, we saw a huge boom as people who
were kind of trapped in their house for the quarantining
(06:07):
and so on and so forth, we're buying things. There
was a lot of purchases being made by the end
consumer that we're leading to a lot of increases in
the transportation industry. So we saw our market, at least
in the marine cargo space begin to increase, and interesting
also in the property space for commercial businesses in their
(06:27):
warehouses also we saw boom in the market there as well.
So the reason that we are now seeing going forward
from twenty twenty three an increase in the market is
because of two main factors. Number One, global trade is
continuing to increase, and that's the biggest factor. And then secondly,
(06:50):
because of a lot of the environmental and when I
say environmental, I will go into that here shortly, the
larger environmental scale of things, companies have paid a lot
more attention to the benefits of insurance overall and their
risk supply chain risk management strategy, largely in part to
(07:10):
the fact that just you know, last year, over three
hundred and eighty billion dollars worth of goods were lost
globally just due to natural disasters and other environmental calamities.
So as you can see, with the increase of certain
risks that are out there, companies are really standing up
(07:33):
and paying more attention to how to expand their supply
chain risk strategy to better encompass insurance as a solution. Wow.
Speaker 1 (07:43):
And is that three hundred and eighty billion dollars Is
that just on the water or that's just globally like
it could be going to were ahouse the tornado rips up.
Speaker 2 (07:51):
That's globally for any form of transportation, so land air ce.
Speaker 1 (07:56):
Wow, that's that's incredible. And then also you know earlier
you may that you see the market growing to thirty
four billion by twenty thirty two. So is that the
marine cargo insurance market you were talking about specifically, So we.
Speaker 2 (08:09):
Speak about marine cargo insurance, it's actually a little misleading.
Marine cargo insurance actually is all forms of transportation. So
even though we refer.
Speaker 1 (08:18):
To the word marine, you're blowing my mind right now.
Speaker 2 (08:21):
Yeah, and it incorporates all air road and see, yes.
Speaker 1 (08:25):
That's good to know. And you know, I guess the
market you say is increasing. So is that because people
are buying more and more coverage or because rates are
going up? What's driving that large increase from twenty point
eight billion to thirty four billion by twenty thirty two.
Speaker 2 (08:45):
There's a few factors that are going into that. Number One,
if the cost of transportation itself increases, the premium organically
also increases. And the reason for that is because when
a company purchases marine cargo insurance, they are covered for
the cost of the goods themselves, the freight that they're purchasing,
(09:07):
if they had to pay any duties or taxes to
end of the country that they're coming into, plus ten percent.
So as the cost of freight increases, the premium automatically
increases as well. Because the purpose of insurance is to
make a company whole. So in part it is due
to freight increasing itself. It's also due to the freight
(09:33):
is increasing because of factors that are outside of the
insurance market, obviously supply and demand when it comes to
the equipment itself. But the market is increasing because of
the freight costs are increasing. In addition to that, with
global trade increasing, the market's also increasing with that. So
(09:56):
the more customers are importing, exporting moving goods within their
own entries and so on and so forth, that isn't making
the market increase. And then the greater attention to insurance
itself as a solution for supply chain risk mitigation strategy.
Speaker 1 (10:14):
Right, And so I guess the large increase that we've
seen in liner rates this year have had a positive
impact on insurance rates going. When I say positive impact,
I mean from your standpoint, not maybe from the buyers standpoint.
So insurance is going to be more expensive because of that, sure,
And I.
Speaker 2 (10:34):
Like to tell our customers because of the increases in
the freight costs, even more important is it to have
insurance because it's protecting that investment of the freight itself
and not just the value of the cargo. So with
the greater investment that they're making in the transportation of
the goods, becomes more of a reason to have the
(10:56):
insurance on the cargo as well.
Speaker 1 (11:00):
You know, because conan Ogle does all surface difference. You know,
they do surface, they do air, they do ocean forwarding,
they kind of they kind of do it all. When
you know, in the insurance market, is is there much
difference for air cargo versus ocean cargo in terms of
either the market or the nuances of the insurance. I mean,
(11:23):
you know, get as wonky as you need to.
Speaker 2 (11:25):
Here, sure, So, I mean the vast majority of the
cargo that's insured is moving on the water. It also
is a riskier form of transportation because there are more
handling points. There's also a longer transit. With a longer
transit comes more risk. So air freight rates typically are
(11:47):
significantly less than the other modes of transportation. Road typically
has the highest rates in the marketplace, mainly because there
is the most risk associated with that mode of insportation.
Speaker 1 (12:01):
And is that risk people stealing stuff or just accidents
on the highways.
Speaker 2 (12:05):
It's really all of the above. It's it's theft. It's
the fact that you know, there's there's accidents on the
roads every day. There are natural disasters like tornadoes and
wind and rain and lightning and other things that can
befall a truck driver. Sometimes we've run into situations where
(12:27):
there's organized crime related to the truck drivers themselves. So
there's all kinds of different factors that go into road
that aren't necessarily applicable to the air and the EC space.
Speaker 1 (12:41):
Yeah, I find that the conferences that I go to
in the industry, people that I speak to, how more
and more theft is kind of bubbling up to kind
of some of the biggest issues facing the industry, especially
as it relates to trucking. So that's that's pretty interesting.
And we've seen truck rates here in the US go
up very very much so in the last couple of years.
Speaker 2 (13:05):
Absolutely, and I feel like I'm doing a disservice to
the transportation solution of rail by not mentioning it. But
also rail is another area where we've seen a huge
spike in theft, particularly on the West Coast in the
last couple of years. We've seen a lot of pillaging
of those containers that are moving on the rail there
(13:27):
as well. So that's another area that's quite risky when
it comes to especially theft.
Speaker 1 (13:33):
And so you know, you're mentioning that trucking insurance tends
to be more expensive than ocean, which tends to be
more expensive than air. Is rail in between trucking and
ocean in terms of the cost of insurance.
Speaker 2 (13:46):
Rail will typically fall somewhere in the realm of the
truck rates when it comes to insurance.
Speaker 1 (13:54):
Oh okay, great. So when we were on that paddle
in philadel you kind of like really educated me on
a couple of things. One of those things was general average,
you know, and that came up because of what happened
with the Baltimore bridge collapse. Can you talk or educate
(14:17):
the listeners here what general average is and kind of
its impact on the situation down in Baltimore?
Speaker 2 (14:25):
Sure? So, General average is an old, ancient maritime law
that began hundreds of years ago because there was a
need to create some protection for the steamship lines in
the liability that they may have there are Back back then,
(14:49):
there were so many situations where it was unsafe waters
or wind or something along those lines, and they may
have to they being the crew may have to jettison
some cargo over the rail of the ship in order
to keep the crew safe to make the journey, and
there are a lot of factors that would go into that.
(15:11):
The crew would have to do what they had to
do to keep them some safe, to keep the ship safe,
and to get the vast majority of the goods to
where they're going. Over time, that's evolved. Obviously there's a
lot more factors that go into the movement of goods today,
but the sentiment of the idea of general average remains
(15:33):
the same. How it works is it just basically says, hey,
the steamship line shouldn't have to take on the burden
of this cost on their own. If something happens between
point A and point B on the journey of this vessel,
if we have to jettison cargo, or if the say,
for example, ship runs aground or gets stuck in the
(15:55):
Suez Canal, or I'm just thinking of some other things
that have happened to over the years recently, then everyone
on the ship who has stake in this cargo is
going to pitch in and they are going to help
cover the cost of whatever has happened. There is a liability.
(16:16):
I shouldn't use the word liability in this case. There
is a responsibility of the steamship line to actually declare
general average, and what that would require is that there
isn't a gross negligence on the part of the steamship
line in declaring this before they do that. So perfect
(16:37):
example of where that may not work and we're waiting
to see is the Baltimore Bridge situation. So, Lee, I'm
sure you've gotten your listeners up to speed with what happened,
but just in case somebody's tuning in for the first time,
I'll kind of explain it. So in late March, the
vessel named the Dolly struck Francis Scott Key Bridge in Baltimore,
(17:03):
and because of that, there was a destruction of the
bridge itself. There were six road workers who were killed
when the vessel struck the bridge. There was damage to
the ship itself, there was cargo that was damage based
on the bridge falling on the ship, and as you
(17:24):
can imagine, this was just a huge disaster when it
comes to lots of different things, death, destruction of the bridge,
the ship, and the cargo. So there have been investigations
from the time that this happened. As to why did
this happen, the ship owner has declared general average, but
(17:50):
there is an investigation that is going on today by
the National Transportation Safety Board, and that's been an ongoing
investigation since the time that happened. They just released a
report on Monday that the reason that the ship did
crash into the bridge is because there was a blackout
(18:14):
because there were two breakers that were tripped unexpectedly right
before the vessel crashed into the bridge. It was there,
estimating about three ship links distance between where the vessel
was at that point and where the bridge was was
when that happened. Interestingly, there also were two blackouts the
(18:34):
day before, and what they found out was that one
occurred because a crew member mistakenly blocked the generator's exhaust
gas stack, and the second occurred because of insufficient fuel
pressure on the ship. So it's been a really interesting
journey to kind of find out what really is going
on here, and of course the vessel owner does not
(18:57):
want to have the liability for that. Just the construction
of the bridge itself, the cost of that is estimated
to be right around one point nine billion dollars just
to rebuild that ship. Or I'm sorry that bridge. Then
of course there's the damage to the ship, like I mentioned,
the cargo itself, and then the families of these six
(19:19):
road workers are going to be looking for some legal
restitution as well. So it's going to be I think
a long journey to find out whether or not General
Average will will actually stick on this one, because there's
some finger pointing going on. Interestingly, this was chartered by
(19:44):
Marisk steamship Line as well, so was not their vessel.
They chartered the vessel from the ship owner who owned
the Dolly, so there's a few fingers pointing there as well.
So it's a really dynamic story that's continuing to evolve,
and I definitely encourage everyone to continue to stay on
top of how that's looking because if General Average does
(20:08):
remain in play, this could be very expensive for those
who had cargo.
Speaker 1 (20:13):
On that vessel, right, And so obviously it sounds like
this is going to be held up in the courts
for a long time before a final decision or is
going to be made. But if General Average were to
come true, if I understand the explanation of it, that
means if you were a company and you had a
(20:35):
container on that ship, you'd be on the hook for
all the liability associated with the accident for a certain
percentage I would gather.
Speaker 2 (20:46):
What will happen is there'll be a dollar amount that's
released as the total amount that has been added up
based on all the different factors, and then they take
a look at who has what stakes. So in other words,
if the value of your goods equate to one percent
of whatever that dollar or whatever the total values are
(21:08):
prior to the accident, then you would be responsible for
one percent of whatever that dollar amount is that is
due to the accident. So the higher the value the goods,
the more containers a company typically has on a ship
at any given time, that will increase the amount that
they would end up paying in those situations.
Speaker 1 (21:30):
And this is the risk that people are mitigating with insurance, right,
So it's not necessarily the shipper is on the hook.
Their insurance company would be on the hook.
Speaker 2 (21:39):
Yes, And therein lies a lot of the reason why
more and more companies are taking a look at insurance
as a solution for supply chain risk. Even just a
few years ago, you talked to a company and they
may say, oh, we're self insured, and traditionally what that
means is a company has a rainy day fund for
whatever may happen when it comes to their supply chain,
(22:03):
if they've got a loss or if they have a
general average event or something like that. But as as
inflation continues to happen, as goods become worth more, as
accidents are occurring more frequently, and general average is being
declared more frequently, this isn't necessarily a great strategy for
(22:24):
companies to employ. And in the case of general average,
if they don't have an insurance policy on their cargo,
then they are actually on the hook to pay the
bond to the entity that is managing that so that
they can get their cargo released and be off the
hook for those charges. And then they wait and then
they wait to find out if there's any further adjustments.
(22:47):
So it's very very interesting and a huge risk for
those that are moving cargo on the water.
Speaker 1 (22:53):
I don't know if you have any stats, so I
might just be asking a silly question, roughly, what percentage
you think of the market is self insured and not
going through traditional insurance.
Speaker 2 (23:04):
You know, I've seen some statistics on it. I'm going
to hesitate to throw a number out today. Just because
they're kind of all over the place. But what I
will say is that the estimation is that there are
still more companies that are self insuring than companies that
are going with an insurance policy to cover their cargo.
Speaker 1 (23:23):
Wow, that's food for thought.
Speaker 2 (23:26):
You know.
Speaker 1 (23:26):
In the trucking insurance market, you know, we've seen a
lot of underwriters leave the market because it's just the
risks are too high and it's just not a good
business for them anymore. So the underwriters, the number of
underwriters are becoming smaller and smaller. Is that true in
the global marine shipping or the global air freight markets?
Speaker 2 (23:49):
We haven't seen that as much with the companies that
we do business with. We're very careful with the companies
that we work with. We make sure that they have
a good risk management strategy in and of themselves. We
want to work with companies that look very diligently at
the risks that they're taking on so that they are
(24:10):
well positioned to give very very comprehensive solutions to the
brokers that are out there. So I can't speak to
seeing that with the companies that we do business with,
but it has happened in the industry yes, okay, And.
Speaker 1 (24:28):
So have you been involved or any at all of
any of the ships being damaged in the Red Sea.
When I say you being involved, I know you're not
doing the damage. But like any of the companies that
you ensure, have they had any impact from the crisis
that's going on in the Red Sea?
Speaker 2 (24:45):
Luckily no, And at this point, given that the steamship
lines are all re routing around the Cape of Good Hope,
we're not really expecting to see that at this point.
Speaker 1 (24:58):
And you mentioned that, you know, insurance rates for ocean
or more expensive than the air because the longer voyage times,
and you know, because people are avoiding this as canal,
that's adding you know, call it anywhere between ten and
fifteen days. So I guess not only is insurance becoming
more expensive because the rates are increasing, but also because
(25:19):
the voyage times are increasing as well. Is that true?
Speaker 2 (25:23):
Yes, there is more risk the longer the transit. So
you know, typically what insurance companies will do, especially for
companies with policies, is they look at that once a
year unless there's a reason to do otherwise. For example,
war risk is a reason to do otherwise. So if
a company is at in jeopardy of having an issue
(25:46):
when it comes to geopolitical tensions or war, the insurance
companies will do an adjustment there, but otherwise not seeing
necessarily a spike in insurance on the the regular rates
as of yet. Now, do we expect to see some
jump next year, yes, probably, but not double digit increases,
(26:10):
probably still in the single digits. And when I had
a conversation with the trade team at Kunanagul about what
they're expecting on the ce logistics side, I said, how
much of the increases that you're seeing on the freight
itself are attributed to this re routing to go around
the Cape of Good Hope, And they said, actually, it's
(26:31):
only about ten percent. The reason for that is because
now we're squarely in peak season from trans Pacific to
the US in particular, is what I'm speaking about. They
don't expect that to end until October. Beginning of October,
but there's going to be a tariff increase in August.
That's what's anticipated, and so a lot of companies are
(26:54):
actually trying to move their cargo and sorry August first,
and so we're seeing some supply issue as well. And
with that, the spot market has become a little interesting.
So there's all kinds of factors that go into it.
But from an insurance perspective, when the rates, we're seeing
(27:18):
the rates increase, it's really just the premium at this point,
and that's because the freight's going up.
Speaker 1 (27:24):
And so when you're talking to your clients, obviously geopolitical risks,
environmental risks, you're trying to ensure against what other large
risks are out there that shippers need to be aware
of when putting freight on the ocean or in the air.
Speaker 2 (27:40):
Sure, there's four main supply chain risks that I like
to put things into buckets. It is the geopolitical risk,
it's the environmental risk, there's economic risk itself. And the
emerging risk that's come out over the last couple of
years is the cyber risk. The reason for that is
(28:00):
I think fairly obvious, but as the world becomes more digital,
so does the maritime industry. And because of that, many
of the communication devices are Internet enabled, and because of this,
we're seeing more and more cyber threats, particularly at ports,
(28:26):
some airports as well. So it's some steamshiplines. Actually, we've
seen it with the steam steamshipline we've seen it with
the freight forward or so it is becoming a much
bigger risk for companies and so we've got our eye
on that and the market is adjusting for that as well.
Speaker 1 (28:43):
And so when you're ensuring for cyber risk a so
you're insured, are you talking about the freight itself is
being insured for cyberrisks? So if it's being held up
at a port because the cyber attack screws up a
portability to take containers off of a ship, then you're
being you're being insured for that or am I missing something?
Speaker 2 (29:04):
Yeah, Typically that's going to be that's going to be
a little bit different. So if there's delay because of
some peril that's happened in the in the movement of
the goods, if a company's cargo insurance policy has a
delay clause in it that allows for them to to
(29:24):
file acclaim against it, then that would cover that. If
the company themselves is not affected their their cyber capability
is not affected by that breach, it wouldn't there wouldn't
be any anything that would touch on that. But typically
cargo insurance it's not going to cover for any sort
of cyber threat that would be a separate policy.
Speaker 1 (29:46):
Gotcha understood? So you know your your your business is
dealing with risks. You know what keeps you up at
night in terms of you know your your your job,
in terms in terms of you know the thing that
concern you most about the industry.
Speaker 2 (30:03):
Yeah, I think it's just making sure that companies know
what they're up against and what those risks are. Because
the estimation on the number of companies globally that have
cargo insurance is so low. I want to get out
in front of as many customers as I possibly can
to kind of let them know what the full story is.
(30:24):
We have a lot of conversations with companies about why
not to bundle their cargo insurance into their typical business
and commercial policies, and why it's best to have a
standalone cargo insurance policy. So that could be a whole
nother podcast lead. So I won't time on that, but
(30:47):
that's the kind of thing that does keep me up,
and not in a bad way. Actually it is in
a good way. It excites me to have the opportunity
to talk to companies about how we can help them
create solutions and their supply chain risk management strategy that
include insurance and other facets that is going to keep
them from putting themselves in a position where they're financially
(31:08):
at risk because of decisions that are happening.
Speaker 1 (31:11):
And in your career on the insurance side, is there
one claim that were event that you saw that was
really like, was shocking to you for a good reason
or a bad reason, And you don't have to give
name names, just you know, kind of like an incident
that was, you know, out of the ordinary.
Speaker 2 (31:33):
One comes to mind. I don't know if i'd use
the word shocked, but I do think it's really interesting
and it's somewhat intricate as well. We had a company
that was importing some goods from Asia and the goods
were held at port because of a customs inspection. Because
(31:58):
they were held so long, then of course they incurred
detention and demurriage. Well really just more demerge because I
don't believe they were on uh with a truck driver
at that point, but demurriaged charges were adding up every
single day. The goods were sitting uh waiting, waiting, waiting, waiting,
(32:18):
and actually while they were waiting, come to find out,
a couple of containers actually had some holes in them,
and so the goods were actually getting damp, not soaked,
just damp when there was precipitation. And this customer lives
and kind of a is located in a subtropical part
(32:39):
of the US, and because of that heat and that moisture,
and of course just general humidity as a whole, it
created the perfect storm where this company is waiting for
their goods to be released. They're paying the demerriage because
the cargo is sitting in the containers. This is for months,
(33:02):
just as an aside, and then when they finally do
get the goods unloaded, they realize they're covered in mold.
The interesting part about this is that they had changed
their business model, and because they changed their business model,
they were moving more cargo on a vessel at a
(33:24):
time than they used to when they started their policy.
And because of that their policy, it was in between
their renewal periods when they decided to do this, and
they increase the amount of containers that were moving at
a given time. A typical policy will have a per
(33:44):
conveyance limit on it, so a certain dollar amount limit
per conveyance, whether that's an airline shipment or sorry, an
airline flight or a sea voyage, if they have X
amount of dollars on that voyage, then it caps out
(34:06):
at a certain dollar amount. Well, because this company had
made changes in their supply chain strategy between when they
renewed their policy and when they were up for renewal again,
the amount of containers that were on that vessel, the
value exceeded what their per occurrence limit was. So because
of all this, it's sort of the perfect storm. Because
(34:29):
of all this, as you can imagine, they had well
over the amount of value on that specific conveyance that
would have been ordinarily covered based on their policy. So
there are a lot of interesting facets on that one.
And so I do encourage companies to if you're planning
(34:51):
on making any changes in your supply chain strategy, or
if you are not reviewing your insurance policy right regularly
to see what those limits are to make your insurance
provider aware. I would encourage any listener to do that,
because it's really important to have a good understanding of
(35:11):
what that policy will cover when you're strategizing on how
to move the goods. And I think the most interesting
part about that is what we find nine times out
of ten, maybe even more times than that is that
the supply chain and logistics team, they aren't negotiating necessarily
(35:32):
their cargo insurance policy. So if it's a CFO, if
it's somebody illegal or compliance, it depends on the company's
strategy with that. They may not know when they're making
a change in the supply chain strategy and it may
not match any longer with what the policy looks like.
So that's the most interesting thing that I've run across,
(35:54):
and I've seen it time and time again. Not necessarily
with our customers because we try to do quarterly review
use with our customers to make sure that we aren't
overlooking something alongside them. But that is something I highly
encourage companies to do, is just look, just understand it,
just know what it says.
Speaker 1 (36:13):
So I was scarious with that example. So if there's
holes in the container, is the owner of the container
responsibility for the damage?
Speaker 2 (36:22):
So what typically a policy will state is that when
the cargo is being loaded, if the container is not
sufficient for the journey, they should reject the container and
request a new one.
Speaker 1 (36:36):
Gotcha, Okay, very good. So when you're not slinging insurance,
what do you do for fun?
Speaker 2 (36:41):
Oh Man? All kinds of things. We actually we love
to travel our family. We love to just go. So
we just got off a cruise ship on Saturday with
a Disney cruise. Not sure if I can say the brand,
but I'm going to say it anyway. We were all
over the Western Caribbean, and prior to that, we were
(37:02):
in kind of the Mothership in Orlando as well, spending
some time there. So that's one of our favorite things
to do is to travel. We've got big plans to
hit all the Seven Wonders of the world. We want
to see all the Disney parks together as a family,
So that's that's a big thing we like to do.
And then, of course I've got two teenagers and one
(37:24):
of which just got our driver's license, which is a
huge relief for me because up until this week I
was shuttling them to all their places. That was one
of my hobbies.
Speaker 1 (37:36):
I know the feeling all too well about that. Well,
hopefully you get to all seven Wonders. Have you gotten
to any of them yet?
Speaker 2 (37:43):
Yes? I have. I've gotten to one. At this point,
I was very close to the second one. I've been
to the Great Wall, and I had the opportunity to
go to to Loom, but I'm sorry to teach Younitza
but instead I went to Tuloom. So we're going to
have to get the family to teaching needsa together and
(38:04):
then hit the rest of them as well.
Speaker 1 (38:06):
Well. It's great to have a bucket list and Channa
and I really want to thank you for your time.
I find these conversations fascinating. I like insurance. Insurance is
very interesting. My first job in inequity research was I
worked for a property and casualty teams as a junior,
so that was fun. Got my toes wet and insurance there.
Speaker 2 (38:29):
So thanks for coming absolutely and thanks for having me.
Speaker 1 (38:32):
It's been a pleasure, and I want to thank you
for tuning in. If you like the episode, please subscribe
and leave a review. We've lined up a number of
great guests for the podcast. Check back to hear conversations
with C speed executives, shippers, regulators, and decision makers within
the freight market. Also, if you have any ideas for
a future episode, please hit me up on the Bloomberg
(38:53):
terminal or at Twitter at logistics Late. Thanks everybody, and
take care
Host
Lee Klaskow
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