Insurance in Logistics a Multitask ChallengeBy Ricardo Guzman | Tue, 09/01/2020 - 15:56
Q: What added value do you offer as an insurance broker specialized in logistics?
A: We offer the only policy that covers acts of authority in Latin America. It is backed by AXA Catlin, which is the main company we work with. This policy covers any damage to property during marine, land and air transportation. Most companies have a clause that particularly excludes any acts of authority.
Customs operations are normally under the charge of poorly trained people, so mishandling of cargo and containers is very common. Longshoremen are unionized and many clients report damaged merchandise that turns into a financial loss.
Six insurance companies used to cover marine cargo but not anymore. In Mexico, there are very few companies that still have appetite for risk in logistics.
Q: How has the COVID-19 pandemic impacted your operations?
A: Since the end of 2019 and during the first half of 2020, cargo plunged between 40 and 45 percent, mostly in inputs coming from Asia, which represents between 65 and 70 percent of our total imports. We have 4,000-6,000 monthly shipments and 75 to 80 percent are imports, so the impact has been significant.
Our operations have not been hit, however, as we are accustomed to working remotely. We fully rely on the cloud. All our 127 employees are remotely connected and constantly sharing information. We have been doing home office every Friday for some time now and I believe we are in a better position than others to face this situation.
We had to redirect some strategies and commercial goals. Recovery will not be as fast as we wished but maybe by 2Q21 or 3Q21 we will see figures similar to 2019. Despite the current contraction, we will end up selling more than in 2019. We will not be close to our initial expectations but considering everything that has happened, the outcome will be positive.
We have operations in six countries but only offices in Mexico. Last year, we decided to open offices in Peru and Guatemala but the pandemic forced us to adapt and open only one office in Panama. By the end of 2020, we expect to resume our initial plan because our expansion goals for Latin America still persist.
Q: Beyond the COVID-19 pandemic, how is data sharing shaping your future?
A: Digitalization is taking over everything and insurance tech gains more relevance every day. One of the companies that belong to our group developed an app that measures damage rates and is mostly focused on robberies in Mexico.
Today we can issue an insurance policy in just five minutes using comprehensive data. An algorithm assesses the value of cargo, origin and destination point, the particular political and social situation of each location, as well as the age of the vessel. Managing all those variables based on verifiable data eases decision-making for our clients.
Mexico has the highest looting rates in transportation. We were behind countries like Brazil, South Africa and Nigeria but not anymore. The security problem here is creating a new environment for insurance agents specialized in logistics risk prevention. Right now, there are changes even in the way insurance companies are underwriting risks.
Q: What has been the impact of President López Obrador’s decision to relinquish port management to the Navy?
A: I think this is not the right way to address this problem. Once again, we are seeing decisions without a rigorous analysis. I believe there is no justification because right now, port operation needs to be enhanced to ensure better cargo handling. There is a lack of coordination between unions and authorities to oversee simple maneuvering tasks and now a new authority is coming that has no formal experience in handling a highly complex operation. I believe there is a risk.
Q: Supply chain disruption is boosting nearshoring strategies. How has that impacted your business?
A: We have no solid reports on that because we are considered a neutral company as we do not work directly with the company that exports or imports goods. We only work with freight forwarders and custom offices, with marketers and carriers.
In the shoe industry, we are seeing some companies choosing domestic suppliers. Maybe they are also taking advantage of this strategy to protect the domestic fashion industry. This can strengthen a sector’s capacity. However, machinery and certain supplies only come from certain countries.
Q: Who are your main partners in the industry?
A: We are registered and licensed by the National Insurance and Bonds Commission in Mexico. Also, we are the only Mexican member of the Latin American Association of Marine Policy Holders (ALSUM). At ALSUM forums, we usually share Mexico’s perspective.
After AXA bought XL Catlin, we established an agreement with the company. Between 90 and 95 percent of our contracts are signed with AXA Catlin. Other insurance companies have not fully understood the nature of the Latin American market.
Q: What areas do you focus on besides logistics?
A: We have partners capable of issuing health and life policies. We can do that for a client but our focus is on logistics, not only in marine transportation, which is the most common transport insurance, but everything covering airport terminals to ship hulls. We even offer financing lines. Together with Zurich, we are the first to offer a civil liability policy covering logistics mishandling, working directly with freight forwarders and customs brokers. There are other products in the market that target this niche but we are the first in creating a specialized product.
Safelink is a Mexican insurance agent specialized in risk prevention for logistics. It provides consulting and advisory services for international transport insurance and cargo and has the only policy that covers acts of authority