Analysis by risk management organization Russell Group shows that current port congestion at Shanghai is costing an estimated $4.5 billion a week in lost trade, opening the door to both supply chain and business interruption risks.
The firm says this is a “clear worry” both for insurers and reinsurers, who could face losses on business interruption coverage.
What’s more, a potential $635 million dollars’ worth of trade from Shanghai to the US is currently under threat, as vessels are over a week behind schedule due to pent-up demand driven by lockdowns in other major Chinese ports.
And Russell Group notes that it is not just exports that are under threat but also imports, with more than $559 million dollars’ worth of ICBs that are normally imported into Shanghai also being delayed.
The analysis was based on a week’s worth of trade in and out of Shanghai, taken from the period of 12th Jan to 19th Jan 2021.
“Talking to our extensive client list of leading (re)insurers, there is a clear worry surrounding the rise in both supply chain and business interruption risks,” said Suki Basi, Russell Group Managing Director.
“This constant dialogue with our clients has led us to enhance and develop our data analytics and modelling scenarios to help them understand their supply chain risks,” he explained.
“Furthermore, our new analysis from the ALPS Scenario Factory shows the precariousness of global trade. In this climate, a lockdown in a major port can have a knock-on effect on another port, in this case Shanghai, which is unable to cope with demand, resulting in delays that disrupt organisations and consumers alike.”
“As always, we want to reiterate the importance of combining good real-time data insights with strong analysis of this data to ensure that corporates and their insurers can navigate through these perilous times without suffering a Shanghai Surprise.”
