Gallagher Re and the University of Oxford’s Program on Sustainable Infrastructure Systems (OPSIS) have announced a research collaboration to help reinsurers understand critical choke points in the global supply chain.

With 80% of global trade taking place through global shipping lanes and ports, the geopolitical landscape has presented challenges for the reinsurance industry. The post-Covid-19 recovery witnessed major supply chain disruptions, followed by geopolitical conflicts that affected trade in both the Black Sea and the Red Sea.

According to the reinsurance broker, OPSIS research will study the impacts of disruptions on global supply chains and assist reinsurers/reinsurers by creating realistic disaster scenarios.

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Dr Ian Willis, director of the Gallagher Research Center (GRC), said the research would help determine whether the causes were geopolitical, environmental or linked to systemic risks such as a global pandemic.

“It is increasingly important to be able to model the indirect impacts of these disruptions, given their potential to impact multiple reinsurance lines,” Willis said.

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Despite the overall strength of the global supply chain, choke points can cause ships to travel longer distances, consume additional fuel, and pass through areas with unique challenges such as extreme weather conditions or increased ship backlogs at indirect ports.

Understanding marine choke points is key to assessing emergency business interruption (CBI) risks. Dr. Willis pointed to recent cases in which blockages led to delayed deliveries of building parts and cars, spoiled merchandise, and shortages on retail store shelves.

Professor Jim Hall also expressed his enthusiasm for the partnership, highlighting that it will lead to a deeper understanding of the threats facing shipping and their impacts on global maritime trade.

“Understanding and modeling these choke points will help us ensure more resilient global systems,” Hall said.

Nick Croxford, head of marine and energy at Gallagher Re, acknowledged the challenges facing the marine insurance industry.

“Getting under the hood and exploring the challenges and potential solutions on the horizon is critical to this industry, which is why we are so pleased to announce this partnership today,” Croxford said.

The collaboration will include sponsoring a Gallagher Fellowship, and supporting the researcher working with scientists at the University of Oxford’s Environmental Change Institute (ECI). This researcher will be affiliated with both ECI and GRC, strengthening the research capabilities of the partnership.

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