Vaccine transportation

Marine market to play critical role in historic supply chain challenge

The effective distribution of Covid-19 vaccines across the world presents arguably the greatest supply chain challenge of all time. Sean Dalton, (left) Head of Marine Underwriting, North America at Munich Reinsurance America, and Robert Sedlmair, (right) Senior Underwriter Marine - Innovation & Single Risks at Munich Re, believe that with the right level of partnership and transparency throughout the risk chain this challenge can be overcome and made insurable

As the global community works together to meet the many challenges brought by the Covid-19 pandemic, the unprecedented work on vaccine development is yielding great results. With vaccines becoming increasingly available over the world, we are now witnessing the start of of a global population in a safe, timely and efficient manner, and so... the transportation and distribution of vaccines is critical. This will require the largest transportation and supply chain efforts ever undertaken and will be on a massive scale. From a marine (re)insurer’s perspective, this requires the following criteria to be carefully assessed:

> The volume. Global logistics company DHL estimates that some 10 billion doses of vaccine need to be shipped over a period of two years to transport the vaccine into the far corners of the planet. This will necessitate 15,000 flights, 15 million cooling boxes and approximately 200,000 movements by pallet shippers; > The values. Industry analysts put the value of the vaccines to be shipped at up to US$100bn. This is an unprecedented amount considering that shipments must be delivered within a relatively short period of time; > The cold-chain. Vaccines are a highly sensitive cargo that are extremely susceptible to variations in temperature. Depending on the manufacturer, temperatures of up to -80 degrees Celsius have to be maintained throughout the entire logistics chain - from the production facility up to the “last mile”, i.e. a hospital, vaccination centre, doctors’ practice or pharmacy. Interim storage of the vaccines requires specialised freezers with monitoring and alarm capabilities. However, today there is a considerable lack of cold-chain logistics capacity suitable for life science products; > Security. In some countries, we can expect that there will be considerable risk of theft and hi-jacking of these highly valuable consignments. Sophisticated security arrangements and loss prevention measures must be put in place along the entire supply chain; and, > Accumulation. The value concentration for single shipments up to storage at facilities such as airports, will reach triple-digit million US dollar values. It is vital for insureds, insurers and reinsurers alike to make sure that risk management measures are in place to monitor and control the accumulations effectively.

ADDRESSING THE ISSUE

Rising to this new challenge requires development of innovative marine re/insurance products and solutions.

The key success factor, however, will be to ensure seamless and secure cold-chain management throughout the entire supply chain. Rigorous temperature monitoring and quality control using state of the art sensor technology will be vital to

ensure that the vaccine is still “fit for purpose” when being administered to THREE ARCHETYPES OF END-TO-END LOGISTICS SOLUTIONS FOR human beings. COVID-19 VACCINE DISTRIBUTION

This is an area in which Munich Re has gathered considerable knowledge, having partnered with several IoT OR companies in the past to help develop solutions in the transportation and monitoring of temperature-controlled 1 OR Pallet shipper Cooling box OR goods. In this regard Munich Re has even created a patented business process to translate sensor data into relevant claims information triggering the indemnification after a loss event much more efficiently. 2 Cooling boxes on pallet Local cross-docking and labeling

Technology has advanced significantly and today tracking algorithms are in place and alarms can be sent to the relevant stakeholders in order to take loss prevention measures. However, this all depends on a 3 Pallet shipper Warehousing Last-mile delivery of cooling box (parcel sized) stable and fully integrated system to create end-to-end visibility on a realtime basis. 1 Direct shipment to point of use 2 Local cross-docking 3 Local warehousing

There are solutions in place, but Direct shipment of pallet shipper Local cross-docking of cooling not enough to meet the demands of boxes on pallet to reduce capacities to break-down pallet a complex global logistic chain, with point of use cross-border costs shipper into cooling boxes many still isolated elements. It is Source: DHL, McKinseyunrealistic to expect that all shipments can immediately be switched from data logger monitoring to real-time sensor technology. Preparatory Our ongoing discussions have proven the level of detail work is needed, new processes must be defined and we need to consider to tailor an innovative product and substantial investment needs to be made to build the the various challenges we face. infrastructure required. The key element to start is to co-operate with the respective industry leaders: Risk managers, insurers, WAKE-UP CALL claims adjustors, logistics operators, IoT/ storage/distriIs this unprecedented logistical challenge the wake-up call bution companies and the like. Full transparency of all that the industry needs? processes in the “end to end” supply chain also needs to

The Covid-19 crisis underlines the need to quickly adapt be ensured. and apply new technologies and solutions, to be in position In terms of scope of cover and determining the to manage exposures of this kind to the backbone of global adequate value insured, it will be essential to identify the trade i.e., the supply chain. actual insured party/beneficiary in case of loss and the

For example, Munich Re has partnered with a global insurable interest at any given point in time throughout specialist marine broker to investigate an innovative cargo the shipment. insurance concept for Covid-19 shipments. There is keen interest on both sides for this concept to

This is likely to involve real-time sensor tracking on a succeed and to contribute to ending the Covid-19 “per parcel” basis from the manufacturer to the final deliv- pandemic as quickly as possible, while also taking marine ery destination. insurance to the next level.

By setting up a consortium of re/insurers with Munich Re being one of the key panel members, we would achieve > The above exhibit visual was extracted from the September 2020 a meaningful spread of risk while mitigating and con- DHL white paper ‘Delivering Pandemic Resistance: How to Secure trolling large single risk exposure that may occur in major Stable Supply Chains for Vaccines and Medical Goods During the distribution centres or storage facilities. COVID-19 Crisis and Future Health Emergencies.’