When container ship Ever Given ran aground and blocked the Suez Canal for six days earlier this year, the world became acutely aware of how quickly global supply chains can be disrupted.

Recent COVID-19 outbreaks in southern China, South-East Asia and Taiwan have reinforced that message and caused further pain. One of those outbreaks, at the end of May, led to a five-day traffic halt for inbound container deliveries to the Yantian International Container Terminal in Shenzhen. In July, a massive backlog of appliances, commodities and toys was still sitting in storage, waiting to be exported.

The past 18 months have been highly stressful for those relying on international ports to conduct business. The COVID-19 pandemic has caused massive disruption on a global scale, and Australian ports have been further challenged by bouts of poor weather, infrastructure upgrades and union disputes. Shipping schedules have been thrown into chaos, resulting in heavy surcharges and rate increases with little or no notice. 

‘The very nature of emerging supply-chain risks is that they aren’t usually predictable,’ says Neil Hiller, managing director of Hiller Marine. ‘Known risks tend to be eclipsed by new types of exposures — unanticipated “black swan” events.

The paradox can sometimes be that as new forms of supply-chain risk emerge, some insurers’ first reaction is to exclude cover for it, COVID-19 being the most obvious example.’

Support for clients

Hiller notes that, in response to the outbreak of the COVID-19 pandemic, most insurers excluded losses arising from an infectious disease. His company took a different approach.

Hiller recognised that clients were incurring extra costs as shipping lines exercised their right to pass on to importers additional freight charges caused by delays or by having to divert cargoes to other ports.

He devised a new product called supply chain risk cover, which is specifically aimed at providing coverage when disruptions occur across international supply chains. 

The policy includes elements of property, stock throughput, business interruption, trade disruption, liability and legal dispute expense coverage. Hiller says the advantage of this approach is that they can identify the particular types of risks that an extended supply chain presents and then deliver a combination of covers that are specifically designed to address these exposures. 

Frederick Gentile, director of risk engagement at Willis Towers Watson in the United Kingdom, also offered increased support to his clients. He hosted conversations with experts such as business continuity professionals and loss management specialists. His team also penned a series of thought leadership articles and delivered webinars to help educate clients about various supply-chain challenges. 

Premium

You need to login to access this

Login

What are CIP Points? About ANZIIF Membership