Data-driven resilience

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Supply Chains

Climate change presents a significant challenge to the supply chains we rely on, reshaping the dynamics of marine cargo insurance.

The ramifications of rising sea levels, warmer temperatures and severe weather events requires cargo insurers to leverage supply chain data to help themselves, brokers and clients mitigate risks, build greater resiliency and make a positive impact on climate change.

So where are we today in this critical area?

First, there are major disruptions to vital waterways. Droughts, heatwaves and escalating global temperatures present a distinct risk to the operation of critical infrastructure.

As evidenced by past crises in the Panama Canal and Suez Canal, rising temperatures and dwindling water levels in vital waterways can disrupt global trade and transportation networks with far-reaching economic implications.

Second, we are seeing longer routes being used due to re-routing.

Shipping routes are extending, caused by disruptions to maritime passages, shifts in trade patterns, higher sea levels and changing coastal topography. These longer journeys result in heightened fuel consumption, increased shipping costs and an increased likelihood of operational challenges, leading to product waste and supply chain inefficiencies.

Boston Consulting Group estimates that ships avoiding conflict in the Red Sea have emitted 13.6 million extra tons of CO2 emissions in the past four months, making it difficult for companies to hit net zero targets and de-carbonise their supply chains. management becomes increasingly critical as the frequency and severity of climate-related events are expected to drive a surge in claims. Leveraging data and analytics, insurers can efficiently determine liability, understand what transpired and when, and get payment to clients quickly.”

Third, we are seeing widening gaps in infrastructure. Climate change exacerbates existing infrastructure gaps within the maritime and logistics industry causing delays and port closures, increased costs and maintenance, reduced cargo-handling capacity and less competitiveness within the sector.

These disruptions reverberate throughout supply chains and regional economies, underscoring the need for proactive measures to build resilient infrastructure in the face of climate change.

Evolution Needed

Insurers must evolve to minimize impacts of climate change.

Leveraging supply chain data becomes even more critical for insurers in navigating the uncertainties posed by climate change.

As a supply chain insurer, Parsyl integrates diverse data sources—spanning real-time insights and historical trends—to identify patterns, assess losses and develop predictive risk models tailored to the specific commodity’s unique challenges.

Risk Assessment

Climate change disrupts traditional risk assessment models for cargo insurers, making predictive modeling a vital tool for improving risk assessment practices by analysing factors influenced by climate change.

Parsyl distinguishes itself by employing data from multiple channels to comprehensively evaluate each client’s risk profile, incorporating a variety of considerations into its predictive modeling frameworks to provide proactive and resilient marine cargo insurance solutions.

Parsyl’s delay coverage model leverages predictive modelling to challenge traditional risk assessment. While many insurers have flagged delay coverage as “too risky” to offer clients, this typically is due to a lack of adequate visibility into the risk. Paryl’s model reveals the nature of particular routes and supply chain conditions and provides its underwriters with the transparency to price appropriately.

Adapt And Mitigate

Countries with greater infrastructure investment are likely to be better positioned to adapt and mitigate the impacts of climate change on their economies and communities.

Insurers must consider this regional variation in their underwriting processes, incentivise customers that make a positive impact on climate change and actively mitigate the specific climate-related risks prevalent in their respective regions.

By integrating data from diverse sources, insurers can gain comprehensive risk insights into commodity-specific vulnerabilities, shipping routes, packaging methods, vendor practices and climate-related events.

Parsyl seamlessly integrates data from multiple sources, including IoT and monitoring data, to better understand risk and reward clients who expand their use of monitoring products.

For example, monitoring data collected by one of Parsyl’s customers showed the temperature stability of their fresh shipments performed notably better than the industry average, with 66% less shelf life lost in transit, allowing Parsyl to offer the customer a discounted rate at renewal.

This holistic approach enables Parsyl’s underwriters to more accurately assess a risk, manage exposure and price transparently, as the underwriting process is informed by data rather than subjective assessments alone.

By blending human expertise with data-driven insights and technology, Parsyl minimises biases and provides clients with more transparent quotes.

This approach empowers clients to understand the factors that influence their premiums, enabling them to make informed decisions and implement risk mitigation measures to reduce costs and make positive impacts on climate change.

Claims Management

Claims management becomes increasingly critical as the frequency and severity of climate-related events are expected to drive a surge in claims. Leveraging data and analytics, insurers can efficiently determine liability, understand what transpired and when, while also getting payment to clients quickly.

Parsyl saw this in action when its customer was notified that the Ever Forward vessel was stuck in the Chesapeake Bay with its container of crab meat.

Because of Parsyl’s use of IoT monitoring data, when the container was finally offloaded, it showed that the crab meat stayed in spec for the duration of the extended trip. The client avoided wasting product and a $340,000 claim. Parsyl rewarded the client for good risk management practices with a 10% discount on their premium.

Predictive modeling is also emerging as a powerful tool in claims management, which could enable insurers to predict claims before they happen and potentially allow clients to intervene to mitigate loss.

It also empowers insurers to anticipate the likelihood and financial implications of future claims, enabling them to allocate resources effectively and manage risk proactively. This collaborative approach fosters a partnership between insurers and clients, united in their efforts to mitigate future risks.

Marine cargo insurers must evolve to build future resilience, transitioning from service providers to strategic partners for both clients and their brokers.

By seamlessly integrating data already collected and engrained in many customers’ standard operating procedures, Parsyl makes it easy for customers and brokers to understand their coverage and premium.

This approach provides a holistic understanding of the risk and allows Parsyl to create differentiated policies without burdening clients or brokers, letting them focus on their core operations.

For example, through Parsyl’s partnership with Lineage Logistics, Parsyl clients who store with Lineage can see anywhere from a 10% -40% discount on their Parsyl insurance premiums as the data provides a view into risk that may be overlooked by other insurers.

By using various sources of data and new technologies, insurers such as Parsyl can offer more precise pricing, develop tailored risk management strategies and handle claims more effectively to mitigate the impacts of climate-related risks on customers’ operations and incentivise those who make a positive impact on climate change.