By Liz Lotz, Head of Client Development Analytics, JLT Re
Global trade and the movement of goods is more important than ever and as cultures become more diverse, there is a desire for different foods and products from overseas – global sea bourn shipments increased by 3.4% and world merchandise trade increased by 2.3% in 2014.
It is becoming cheaper to transport the products than ‘make’ it ourselves, and let’s not forget the internet: quite simply, the developed world is changing its daily life around internet shopping. In a busy environment, this convenient method of obtaining our goods allows us to find our required product at the best price from our desks – but these goods need to be stored somewhere and these distribution centres are becoming larger, filled with more expensive goods and generally more extensive than ever.
One of the biggest issues seen during my career is the re-keying of data and information, both in terms of quantity and quality. Twenty or so years ago when we started to capture information into databases, I realised that all of this information is already captured somewhere, so why are we capturing it again (and again and again)? Today we have the Cloud, big data and handheld technology to allow us to capture all of the information we need – in fact my smart phone has 4,096 times more memory than the Apple Mac of 1984. So why are we still not capturing information in a much smarter fashion?
But what does Utopia look like? Assume some goods leave a warehouse for shipping, they are logged into a device and provided with a bar code. This code helps us to understand what is packaged, its weight, its size etc. It is taken to a distribution outlet where it’s packed into a container and needs to be shipped abroad. The Bill of Lading is completed for this and information is held against that container number. The container is loaded onto a ship and that is registered on the vessels manifest.
The ship starts to move – we can track this using the automatic identification system (AIS) and can easily obtain details such as the last port of departure and arrival. We know where the ship is at any time of the day. It arrives at its destination and the goods are off loaded and placed into a warehouse for further distribution. All of this information is stored electronically somewhere, but it is still difficult to access the information relating to our risks, which can in turn assist us in managing our exposure, but very little of it finds its way to the insurance analytics desks.
Individual risk exposures need to be understood in order to manage risk accumulation. One of the most recent instances of risk accumulation was the explosion in the port of Tianjin in 2015, which once again surprised the cargo market with the scale of the loss but involved many different lines of business, even though all risks were contained in a relatively small area. If the information flow, as per the example above, was more streamlined and aligned, then risk managers can more quickly assess the actual exposure and risk within a certain accumulated zone – for example, clients could better manage their risk to ‘zonal limits’ or build out short term insurance placements if a more ‘real time’ approach was in place and manage these potential accumulations.
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For further information, please contact Liz Lotz, Head of Client Development Analytics, JLT Re on +44 (0)20 7886 5408 or email firstname.lastname@example.org