Risk Intelligence

Hurricane Irma

Hurricane Irma Closing in on Florida

Hurricane Irma Closing in on Florida 897 736 adapt ready

Hurricane IrmaAs Hurricane Irma barrels down on Florida, insurers are vulnerable to a myriad of exposures. As of this writing, all the major and minor ports serving the state have been shutdown.

The Tampa, FL port is a crucial gateway for fertilizers as it handles over 20% of the US exports, with its biggest customer, The Mosaic Company, being affected in particular – not just from the port closure, but due to the closure and potential impact on its phosphate production locations in the vicinity.

Mosaic serves customers in over 40 countries, and acknowledges that it conducts operations through a limited number of key production and distribution facilities. (Phosphates accounted for nearly 41% of the company’s revenues in 2016). The larger implications on agri-based businesses (including Campbell Soup, Kellogg, Tyson Foods and PepsiCo) remains to be seen.

Irma is also after orange juice: Bradenton, FL based Tropicana, is the world’s largest producer of branded juice, and one of the billion-dollar-plus subsidiaries of PepsiCo. The Tropicana plant is in the path of the hurricane, and its closure could severely impact production for days to come.

A quick rundown of industrial exposures at major ports follows:

Major PortIndustryPotentially Impacted Companies
TampaFertilizer, Agriculture, Food & BeverageMosaic Company; PepsiCo; Campbell Soup
JacksonvilleAuto industry (635,000 automobiles imported annually)Volkswagen; Porsche; Toyota
Port EvergladesIndustrial and heavy equipmentHurst
MiamiClothing, medical equipment and pharmaceuticals, metal products, and printingSteiner Atlantic; Noven Pharmaceuticals
West Palm BeachShips and boatsRybovich; Horizon Yacht; Bahama Boat Works

A more detailed connected risks report will be sent to our partners. If you wish to receive the report, please sign up with your name and contact details below.

    Hurricane Irma’s Forecast Cone image courtesy of the National Hurricane Center.

    Tianjin Port Explosion: 20 Months On

    Tianjin Port Explosion: 20 Months On 640 426 adapt ready

    About 20 months after the Tianjin Port explosions that left insurance companies with as high as ~$4bn in claims, the port stays abuzz with cargo activities, with Beijing-based companies expected to invest $23 billion in the city. In 2016, the port saw throughput volumes to the tune of 14.49m teu, a 2.9% year-on-year rise.

    • “Tianjin port will apply the brakes to coal transportation by trucks from the second half of 2017, to alleviate pollution caused by diesel-powered trucks and coal consumption”, the mayor said.
    • Environmental clean-up is complete, new facilities built to improve local surroundings
    • The Ministry of Environmental Protection have established an environmental monitoring station to scrutinize the port and surrounding areas 24 hours a day
    • For four months after the blast, the city had checked more than 2,000 enterprises that dealt with dangerous substances and chemicals

    What are insurance companies doing?

    Adopting InsurTech

    “Insurance Technology” or the topic of technology-driven innovation in insurance is the focus for most insurance companies. Drones, robots, start-ups in this space, are contributing to its growth. Sensors built on ‘Internet of Things’ are being used on cargo to help companies rapidly understand the situation after catastrophic events (e.g.: the Tianjin explosion)

    Applying Changes to Cargo Underwriting
    • Building newer disaster models and cargo models
    • Improved understanding of risk accumulations
    • Pricing for the unknowns

    What do experts say?

    All Eggs in One Basket

    The Tianjin event highlighted how risks can be accumulated in a single location. A massive 285 of the Fortune Global 500 companies had facilities there. Following the event, insurers and reinsurers were exposed to claims from multiple lines of business, involving multiple policies across property, marine, motor vehicle and personal injury.

    Data for annual turnover in terminals, average turnaround times and market share of an insurer etc., enables calculation of risk scenarios and to identify accumulations.

    Know Thy Neighbor

    If the underwriters in case of Tianjin had known about the presence of lethal chemicals in Ruihai International Logistics, they would have priced the risks very differently. It is essential for underwriters to understand and evaluate neighboring risks/risks in proximity.

    BI from human error supersedes those from Nat Cats

    Mr Damien Pang, Head of Short-Tail Claims at AGCS Asia, notes that increasing BI claims are more from human error or technical failure rather than from Nat CATs. He suggests companies to increase their supply chains’ resilience by mapping them, identifying critical suppliers and their locations, get back-up suppliers and increase stocks. “These “redundancies”, once considered “cost-blocks”, are now instead viewed as investments in reliability and safety” he adds.

    Big Data and Analytics

    To fully exploit the capabilities of Big Data and Analytics, quality data is needed. Industry experts had commented that effective data communication was lacking throughout the underwriting process for the Tianjin event.

    An industry-wide transformation is happening in this area:

    • Consultancy firms launching newer and better cargo modelling tools.
    • Containers are being fitted with RFIDs to help identify locations.
    • Learning lessons from property businesses in Florida where risks come into the market with huge amounts of exposure information.

    Big Data and smart analytics will help make marine data more accessible, thereby enabling better assessment of cargo risk accumulations and create greater scope for modelling. They can also be used to build a knowledge profile of an area or specific property, including proximity to Nat CAT risks.




    Why should I care about InsurTech?




    Container ship by anaulin is licensed under CC BY-SA 2.0

    Cybersecurity and Climate: Two Emerging Risks Needing Equal Attention

    Cybersecurity and Climate: Two Emerging Risks Needing Equal Attention 770 512 Davis Cherry

    In May 2016, Cybersecurity Ventures released its Cybersecurity 500 list, a “global compilation of leading companies who provide cybersecurity solutions and services.” Already at approximately $400M per year, cybersecurity is calculated to cost for the global economy could reach $3 trillion by 2020. Meanwhile, extreme weather and climate events may already be costing the global economy $1.2 trillion per year—so who is at the top of the “Climatesecurity 500”?

    Well, we couldn’t find such a large list, or even a list.

    With such comparable magnitudes of costs, one would expect a similar number of firms and innovators in this space. One might argue that big consulting firms like PwC and KPMG are occupying the climate risk space, but, they also have large cybersecurity offerings which don’t seem to crowd out hundreds of other cyber solutions and services.

    Cyber and climate risks share similar features, such as global reach, potential to shut down operations for extended periods of time and ability to impact critical infrastructure, such as electricity grids.

    One explanation could be that cyber attacks can include the extraction of customer data and direct attacks of financial assets that can lead to significant reputational damage and lasting distrust of corporations by their customers. It is also easier to put a face on cyber crime—whether it is a government, individual or hive of hackers—and know what their motives are—primarily to steal financial data, but also acquisition of company and state secrets, espionage, retribution or simply “bragging rights.”

    Climate risks are much more random, faceless and often considered “acts of God.” Companies may also be under a false sense of security thinking that they are already managing climate risks by tracking historical flooding, storm, temperature, fire, etc… data—we have seen, time and time again, that the past is a poor predictor of the future. Further, the presentation of climate data—in long-term projections and at regional spacial scales—can make addressing these risks seem very far removed as a C2ES survey finds that companies are lacking ” ‘actionable science’ that helps them understand locally-specific risks or risk scenarios.”

    Comparison and analysis of the maturation of these two markets warrants greater analysis and there could be a variety of other reasons for this differentiation. But, the stakes are so high, its important to find out how risk information can better disseminate across companies and communities.

    To help move the industry forward, Adapt Ready is focused on helping customers and the world better understand the real risks they face, take action and avoid losses. Hopefully we will soon see a list of company’s helping the world adapt to one of the other biggest security threats of our time.