There's a lot going on in the cargo insurance market. To help keep us informed is Robert Moody, Global Director of ECIB, with answers to the most popular questions about today's cargo insurance market.
ECIB: What are some of the key risks in the cargo insurance market right now?
Robert Moody: Supply chain issues continue to be one of the biggest challenges facing customers. While some of the congestion has eased, especially around airfreight, there continues to be issues with congestion in select ports, a shortage of truck drivers, and staffing shortages just about everywhere. This can be challenging for customers to manage and know when their freight is going to arrive.
This has been eased a bit by the economic slowdown and decreased demand for many products, but that has also led to higher inventories, additional locations that are needed, and greater static exposure for anyone that is covering stock through their cargo program.
ECIB: Do you see this changing anytime soon?
Robert Moody: We have seen some indications that supply chains are improving, however, this will be a slow process as it will take time to get things back to pre-pandemic levels. Efforts have been made to get more truck drivers onto the road, including lowering the age required to drive a truck. While this may get more freight moving, it will also increase the risk of cargo on the road due to more inexperienced drivers, effectively transferring the risk from the port to the road.
Inventories, stock, and the risk that is piling up here will largely depend on the economic environment. As the demand for product begins to increase, inventories will come down again, but it is anyone’s guess right now on the timing of this.
ECIB: Are you starting to see signs that the hard market is easing up?
Robert Moody: Yes, we are seeing signs of this from several cargo markets. While rates are still up in general, we are not seeing the large double-digit increases that were prevalent in the past few years. Of course, there are still some instances where this occurs, but it is generally more related to the loss picture or the overall exposure, and less due to the market correction that we all saw the past few years. This is a good sign for customers, but much remains to be seen as to how far this will go.
ECIB: What are your customers sharing with you as their biggest concerns?
Robert Moody: Insurance capacity and claims continue to be two of the biggest concerns we talk about with our clients. Over the past few years, many markets reduced the limits they were willing to offer on large programs, making it tougher for clients to fill out what they needed. More markets have had to be added to fill out the same or less limit capacity, and at a higher cost. While rates may be starting to ease a bit, the appetite for capacity seems to be taking a little longer to get back to where it was a few years ago.
On the claims side, many customers experienced an uptick in claims through the pandemic due to a lot of the congestion issues. For many clients, this highlighted the fact that they did not have a good claims process in place and were caught unprepared to handle the claims. We have seen an increase in demand for claims management services from many clients in the past year.
ECIB: What advice do you have in general right now for your clients, given the environment?
Robert Moody: Make sure you have the right partners to help with both cargo insurance and claims, as the environment continues to be challenging. Many clients have needed to restructure their programs, change limits, add additional warehouse locations, and deal with claims. Making sure you have the right partner to help you evaluate and manage this is key to making sure you are prepared.
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