With 80% of the world's trade being conducted through global shipping lanes and ports,* the geopolitical landscape has been challenging for the (re)insurance industry in recent years. Post COVID-19 recovery saw major supply chain disruptions, rapidly followed by geopolitical conflicts impacting trade in both the Black Sea and Red Sea.
The OPSIS research will examine the impacts of such disruptions on global supply chains as well as helping (re)insurers through the creation of realistic disaster scenarios.
"This research by Oxford will be vital in helping us establish whether those causes are geopolitical, environmental or related to systemic risks like the global pandemic," explained Dr Iain Willis, director of the Gallagher Research Centre (GRC). "It is increasingly important to be able to model the knock-on effects of these disruptions, given their capacity to impact multiple (re)insurance lines."
While overall global supply chain remains strong, choke points can lead to re-routed vessels travelling longer distances, using additional fuel and often requiring them to pass through areas of the world that present other, unique challenges — such extreme weather conditions or leading to larger accumulations of vessels in spillover ports.
Insight beyond the marine insurance market, into property risk, will also come to light, as modelling marine chokepoints is fundamental to understanding property contingent business interruption (CBI) risk. "We've seen instances recently where these blockages have led to delayed delivery of construction and automobile parts, spoiled cargo and shortages on retailer shelves," added Dr Willis.
Prof Jim Hall commented: "We're delighted to be partnering with Gallagher Re for this new Fellowship which will deepen our understanding of threats to shipping and the implications for global maritime trade. Understanding and modelling these chokepoints will help us to ensure more resilient global systems."
Nick Croxford, head of Marine and Energy at Gallagher Re added: "The maritime insurance industry faces a myriad of challenges today. Getting under the bonnet and exploring both the challenges and potential solutions on the horizon is crucial to the industry, which is why we are so thrilled to be announcing this partnership today."
The partnership will also include the sponsorship of a Gallagher Fellowship, supporting a researcher working with scientists at the Environmental Change Institute (ECI) at Oxford University, affiliated with both the ECI and the GRC.
Source
*Kalouptsidi, Myrto. "The Role of Shipping in World Trade," Econofact, 9 Jun 2021.
