Paul Lucas [00:00:08] Hiya everybody and welcome to the most recent version of Insurance coverage Enterprise TV delivered to you in affiliation with Falvey Insurance coverage Group. And this version we’ll be joined by Eric Newman, Senior Vice President of claims loss prevention and recoveries at Falvey, the place he’ll talk about present provide chain dangers within the wake of the pandemic, which after all, brought on unprecedented disruption. He’ll communicate to using information analytics and know-how for predictive threat modeling and the significance of partnering with underwriters, brokers and purchasers on efficient threat administration and loss prevention methods. So let’s delve into all issues provide chain, lets, Eric, welcome to Insurance coverage Enterprise TV.  

Eric Newman [00:00:50] Paul thanks for having me, it is a pleasure to be right here.  

Paul Lucas [00:00:52] Simply to start out by setting the scene for us, when you do not thoughts, speak to us about how massive an impression the pandemic had on the provision chain and what points it brought on.  

Eric Newman [00:01:02] Whereas the impression of the pandemic on the provision chain was important. Nevertheless, earlier than the pandemic hit, , points have been being seen inside the international provide chain that have been attributed to a variety of issues, not the least of which have been commerce points between us in China and different elements of the world. However what the pandemic did was uncovered to the sheer fragility of the worldwide provide chain. , folks have associated, , the timing to the pandemic with the proper storm situation, which is extraordinarily correct. Previous to the pandemic firms by and enormous managed their provide chains based mostly on a simply in time precept, which was actually targeting being lean and environment friendly. And this meant sustaining very, very low stock ranges, and maximizing effectivity efficiencies to yield larger earnings and, and what the pandemic when every thing shut down. What that did was that brought on manufacturing distribution amenities to close down worldwide. After which one thing peculiar occurred with every thing shut down. Whether or not it was a usually anticipated to be sort of successful on shopper demand, it nearly went the opposite manner, the introduction of everybody being of their confined into their properties, properties, they usually actually put the stress on the E-commerce market. And it actually put the pressure on the on the on the worldwide provide chain, as a result of firms then needed to, needed to gear up and sort of reply to that demand, which actually put additional pressure on the provision chain and actually resulted in large surge. And in shopper spending. The opposite fascinating factor is when the when the pandemic occurred, vessels mainly reduce down and decrease their capability took benefit of possibly getting vessels in to have repairs and preventative upkeep. They usually have been behind the curve when the when the this surge within the E-commerce required, , the capability to be at unprecedented ranges. And that is the place we noticed a whole lot of the vessel site visitors actually being getting these empty containers over to China, proper? Predominantly, to fortify that these calls for and get items coming from Asia again to the to the west. And due to this fact, we noticed a whole lot of however we noticed a whole lot of demand and transport and with minimized capability. That resulted in minimized the variety of a restricted variety of sea containers as a result of nearly all of the vessels that have been going to China to load items have been crusing with MPC containers. And so what in flip, all these MPC containers have been crammed up as firms ramped up their manufacturing, and that led to the disruption within the bottlenecks within the backlog on the ports that we noticed particularly in Lengthy Seashore in LA. And the opposite factor that additionally occurred, it was an fascinating factor, and I do not understand how a lot consideration has been paid to this, I do know that we actually in our house, seen that we noticed a whole lot of these vessels, these extremely giant container vessels that may carry upwards of 14,[000 containers and more coming from China to the US for losing several containers during rough seas and the North Pacific. One of the things that we attribute that to and in done some research on this as these ultra large container vessels were never really or had not really sailed at full capacity or near full capacity. And now with the surge in demand in the in the requirements for these vessels to be loaded at near capacity. They were basically undergoing sea trials and sea conditions that maybe they had not been trialed before. And I think that has a lot to do with the incidents that we saw. I think in 2020, we lost more than 3[000 containers. But the industry lost more than 3[000 containers at sea. So it really was a perfect storm of all of these factors happening. And really, at the end of the day, it really did expose the industry to the true fragility of the supply chain in which they’re now taking measures to correct  

Paul Lucas [00:04:56] Yeah, and so it was an unbelievable interval after all, however when you do not thoughts simply quick ahead somewhat bit far as we have largely come out of the pandemic, now, are there any residual dangers remaining for the provision chain? 

Eric Newman [00:05:07] Actually residual dangers I imply provide chain disruption remains to be current remains to be we’re nonetheless seeing steam seeing bottlenecks and, and restrictions, the worldwide provide chain is stabilized by and enormous, many firms are nonetheless struggling to reopen and re employees their operations. There continues to be employee shortages we’re all of us are conversant in. And there continues to be delays and backlogs albeit not as not as a lot as we noticed within the top of the pandemic. However we’re nonetheless seeing, we’re nonetheless seeing these backlogs and disruptions within the within the in provide chain properties now because of understanding how uncovered their provide chains have been. And switching from this simply in time stock administration system to regulate in case handle stock administration system, which implies increase stock ranges, and including provide companions and diversifying your sourcing networks, which has positioned an added, , the chance to firms that need to do all of this stuff and proceed to construct up inventories, it is rising values of products which might be being shipped. So insurance coverage firms are seeing larger, larger values, that is the inflation that is going that is taking place can also be contributing to the worth of the elevated values of products being shipped. So it is nearly in response to the pandemic, we’re seeing a whole lot of provide chain exercise Properly, whereas firms pivot to attempt to defend themselves from being uncovered, once more, ought to one other occasion just like the pandemic occurred. However it additionally has elevated threat inside the provide chain. 

Paul Lucas [00:06:38] A number of dangers which have emerged as effectively which might be maybe not wholly associated to the pandemic, we’re speaking about issues like cyber threat, after all, all these geopolitical tensions that we’re seeing proper now at a altering manufacturing footprint as effectively. Any points that you just suppose brokers ought to be significantly centered on in the intervening time with their purchasers? 

Eric Newman [00:06:57] All of these dangers that you just talked about are we’re seeing they usually it’s critically vital for firms to concentrate on these dangers as they appear to construct extra resiliency and agility into their provide chain. One other issue that that is taking place that we’re seeing that you just did not point out was the altering climate patterns and local weather change. And that has elevated the pure threat hazard that we have seen storms taking place and unhealthy climate occasions taking place in elements of the world that that hadn’t seen that it had no historic developments in that nature. However you talked about cyber threat. And that is, that is a significant concern to the worldwide provide chain. And it is sensible that that threat will increase as a result of as firms broaden their footprint, their manufacturing and distribution footprint, they’re working with increasingly service suppliers, which is which requires them to depend on these service suppliers, infrastructure and programs as they share in crucial data through which to transact enterprise. This places them at better threat of cyber assaults, and places extra emphasis on the businesses to vet out these firms to guarantee that not solely are their cyber safety programs applicable and sufficient for the assess threat, however the companions that they are working with globally, or have additionally the identical kind of safety and resiliency in there to restrict their total threat as they broaden their operations. I used to be studying, , in making ready for the for the interview, I used to be studying at Deloitte research that that is acknowledged again in a survey taken again in 2019, the place 40% of producers that have been surveyed, had been affected by a cyber assault. And I am fairly certain that if we have been to revisit newer research than three years in the past, we discover out that that quantity is greater than seemingly elevated. So it’s a massive, it is a massive concern. And insurance coverage firms and brokers clearly are conscious of this. And it has been a problem to guarantee that the suitable options are on the market from a monetary safety or from insurances and people kinds of issues. geopolitical tensions you talked about, that is a significant concern, clearly, the struggle in Russia and Ukraine continues so as to add in danger and trigger additional disruption to the provision chain. And it additionally the opposite factor that is taking place is a few of these disruptions and I discussed sort of the change and manufacturing that firms need to do to turn out to be extra strong and resilient is the entire thought of shifting manufacturing amenities out of China the place predominantly a lot of the manufacturing is completed and shifting them to different different places resembling Southeast Asia, Mexico and India. And in doing in order that’s inserting added threat and added pressure on their provide chain operations as they need to construct up and get located in these different different amenities. So it simply it is including extra merchandise to the provision chain which additionally as we have talked about will increase total threat.  

Paul Lucas [00:09:41] Now it wasn’t a shock for me to see you dedicate a lot time in that reply to cyber threat as a result of that is the adverse facet if you’d like of know-how, however I do know know-how may also be used for good as effectively. Are there any explicit developments in that house with tech or day information that may maybe assist mitigate a few of these dangers for insurance coverage? 

Eric Newman [00:09:43] Positive is I imply, firms actually are firms which have relied on extra handbook programs and antiquated software program are actually taking a look at digital digitization as a approach to improve their total operational workflow. In people who’s profiting from things like AI, the Web of Issues and utilizing monitoring applied sciences and sensors to watch their shipments, and actually sort of profiting from forecasting, modeling software program platforms that permit firms to have extra visibility and transparency into their provide chain, which helps them by way of predictive analytics capabilities permits them to, to establish doubtlessly, have been bottlenecks may occur in order that they will then pivot and possibly enact some contingency plans that that at the moment are a brand new concentrate on firms as they appear to do no matter they will to reap the benefits of these new technological advances to reduce the chance ought to one other occasion happen, which, , they may in several levels. So I believe we’re seeing a whole lot of the AI know-how that we have all examine and heard about is one main answer and step ahead within the trade, that is permitting a few of this predictive analytics to assist them handle their respective provide chains. 

Paul Lucas [00:11:17] And simply away from the tech developments, or low in any of the guidelines for threat mitigation within the provide chain that you could provide us? 

Eric Newman [00:11:26] One of many issues that we’re seeing from our vantage level is that we have talked in regards to the elevated inflation, speaking in regards to the elevated value of residing all over the world because of that inflation. The extra cargo that is being put into the provision chains, as firms re-manage and re-set up their re-establish their manufacturing operations, has put a whole lot of, as I’ve talked about, items in transit, and particularly, particular shortages and metallic uncooked supplies which might be utilized in so many the merchandise that we rely upon at this time from the electronics trade, to the automotive, biotech industries, these are all being focused by skilled legal organizations. And there is a motive that they are doing that not solely due to the worth they convey, however the total international scarcity in a few of these, these metallic shipments are permitting them to be incentivized as a result of they can transfer these merchandise fairly simply given the worldwide scarcity and shifting the merchandise by way of illegitimate implies that that is not simply to say the valuable metals in these kind of shipments, it is the products which have at all times been extremely focused in, in our trade, resembling prescribed drugs, in excessive tech and meals and beverage and people sorts of merchandise, that are at all times excessive on the on the theft goal checklist, we’re seeing steadily rising charges of cargo theft from each warehouses in static retailer conditions to in transit, truck theft and people kinds of issues. Simply because solely, , one of many largest issues is de facto the inflationary circumstances of the worldwide financial system and, once more, the added the quantity of quantity that being entered into the provision chain. And this requires the businesses actually check out that, along with every thing else, they’ve to take a look at given every thing happening the provision chain, however they actually should pay explicit consideration as to who they’re doing enterprise with. And what firms what transportation and logistics service suppliers are they utilizing? And are these firms those which have the providers, the capabilities and the  {qualifications} to deal with this, this threat publicity, that is one threat publicity that I am that I am bringing consideration to, to guarantee that they perceive that the chance and that the service ranges that they are requiring of the service suppliers is sufficient to thwart the chance of a majority of these thefts. 

Paul Lucas [00:13:39] A implausible tip, when you do not thoughts, I am simply gonna shoot for yet another, Eric. So I am certain there’s loads of brokers who’re watching this at this time. And maybe they’re pondering to themselves or Eric’s given me a whole lot of nice data, however what ought to my priorities be? What kind of motion ought to I take? Do you might have any, any steering for them in that regard any actions that they need to take with the shopper as a as a high precedence? 

Eric Newman [00:14:02] I consider it is crucial that brokers are acutely conscious of the present international provide chain setting and positively the developments that their purchasers are seeing and the developments that the trade at giant is confronted with and what steps are being taken to construct resilient and agile provide chains to mitigate threat. I believe it is actually vital for brokers to know their purchasers operations and be capable of present them with insurance coverage answer choices which might be tailor-made and applicable for these their purchasers particular operations. And which means partnering with underwriters, that that present comparable providers which might be tailor-made and particular to these sorts of dangers. In doing so, these kind of underwriters have the capability to offer worth added providers that purchasers will want and it is going to be very useful in that and people are threat administration, session providers. These are loss prevention and and threat mitigation methods which might be based mostly on confirmed trade greatest practices. And it is also taking a look at basic service vendor relationships and establishing, as I discussed, the fourth the fifth subject, ensuring that they’re working with their underwriters of their brokers to verify the companions that they are working with not solely simply with their with their technological capabilities and their cyber safety, however their total service capabilities to guarantee that they’re correct for the kind of items which might be being shipped. And underwriters and brokers alike might be a useful asset to firms as they checked out how you can sort out all of those, all of those new exposures in these dangers that they are seeking to pivot to, to guarantee that they’re resilient and agile going into 2024 and past. 

Paul Lucas [00:15:48] Implausible suggestions. Eric, actually respect your time. If anyone needs to succeed in out to you or to Falvey Insurance coverage Group on the again of this dialog. How can they get in contact? 

Eric Newman [00:15:58] Yeah, thanks, Paul. Its [email protected] 

Paul Lucas [00:16:05] We wish to hold our provide chain of a terrific interviewees coming similar to Eric after all. So be sure you be part of us subsequent time proper right here on Insurance coverage Enterprise TV.