Colson and welcome to today's webinar, Supply Chain Disruption and its Implications on Inland Marine, hosted by Inland Marine Underwriters Association's San Francisco region of the Pacific Coast Advisory Committee. Before we get started, we have a few quick items to review to help enhance your virtual seminar experience today and to help reduce strain on your local network. We suggest you close all unnecessary browsers and internet-reliant programs. You'll find your attendee control panel on your screen and it will minimize by default. At any point, you can see the orange arrow icon. Simply click on that orange arrow and uncheck the auto hide option and that will allow you to view the control panel again. If you have questions for our presenter, Alex Rosa, whom we'll introduce shortly, please use the Q&A box throughout the session to type your questions and Alex will address your questions as time allows. We will also have a final Q&A at the end of this presentation and we'll also have two $25 Amazon gift cards for the most engaged attendees with the best questions. So we'll announce those winners after the final Q&A session. Please be aware of the IMUA statement and also the IMUA mission statement and the IMUA policy statement, reminding all to refrain from entering into any discussions on matters affecting rates or conditions of insurance contracts. Thank you to the entire San Francisco Regional Committee members as well as to our presenter, Alex Rosa, for sharing her experience with us today. Putting together the regional webinar. And special thanks to Myrna Calderon-Hanson, Michelle Church, and Frank Bassage for working with Alex on this presentation. Thanks also to my colleagues, Ali and Ainleen Monre-Ali, for all they've done behind the scenes to ensure the success of this event. And without further delay, let's give a virtual welcome to one of today's, to one of the San Francisco Regional Advisory Committee members, Frank Bassage. Thank you, Lillian. Good day, everyone. On behalf of the San Francisco Regional Committee, welcome. We are excited to be able to offer you, to offer to our community of underwriters and brokers events such as this. We are excited to be able to offer you a virtual welcome to this event. We have an excellent turnout today for today's webinar with 195 attendees registered to participate. Our committee members are Myrna Calderon-Hanson, who has served as our chairperson of the committee for the past two and a half years, Michelle Church of AGCS, Monique Howard of AWACS, Gina Mendoza from the Hanover Group, Carter Helm from Berkeley Insurance Group, Melissa Trimble from GenRe, Shafir Khwazani from AGCS, and me, Frank Bassage from AXA XL. We look forward to having live events in the Bay Area later on this year. However, we will continue to have webinars from time to time on topics that will resonate with the IMU's nationwide membership. Now, without further delay, it is my pleasure to introduce Alex Rosas. Alex is President and Underwriter at Amwin Specialty Logistics Underwriters. Prior to Amwin, Alex was a Complex Cargo and Logistics Underwriter at SOMPO International from 2014 to 2018. He was also a Hull and P&I Cargo and Logistics Underwriter at Blue Water Insurers from 2007 to 2014. He entered the marine insurance industry at the age of 16 as a part-time P&I Underwriter. Let's give Alex a warm welcome and a virtual round of applause. The floor is yours, Alex. Thank you. Thank you very much, Frank. Thank you, everybody here. Today, we're going to be talking about a particular topic of importance, and a lot of inland marine underwriters need to hear some information regarding how is the industry changing, how are we evolving, how does supply chain, which is kind of the beginning of our problems, or the origin of the problem that we're seeing today, how did it start, how is it going, is it ending soon? So, we're going to be talking about the state of affairs, root causes of supply chain disruption, the domino effects of COVID, the effects that that has had in the insurance industry, the delegacy of the supply chain ecosystem, reflecting a little bit about have we learned our lesson or are we still on our way to learn it, and also if there's any end in sight and what can we do as underwriters to try to look at risks differently to understand and accumulate all of these variables within what we do on a daily basis. So, we're going to start with an introductory poll. So, what is the average number of containers that arrive at the Port of Los Angeles in any one day? All right Alex, I see the answers coming in. We're just going to wait a couple more seconds and then I'll close the poll. Good deal. And the results are up now. Good deal. So it seems like most everybody was right on target. So the Port of Los Angeles in Long Beach is the largest port in the United States. It represents 40% of everything that comes in to the United States at any given time. And 29,000 containers make their way through that port on a daily basis. Now that's due to the COVID pandemic. The Port of Los Angeles in reality is designed to handle only 18,000 containers. We'll see further on how does this affect the inland marine industry. So keeping in mind also that 40% of everything that comes into the United States come through these two ports. When you look at them from the air, they're in reality combined. One ship can take to the left, one ship can take to the right. So there are an estimated 5,000 backlog containers at any given time accumulated in the port. And a lot of people start asking why. What is going on with supply chain? Why hasn't this happened before? And there's a lot to do with our dependency on other countries, but mainly in China. About 40% of what comes to the Port of Los Angeles – sorry, about 80% of everything that comes through those two ports, and if we extend to the Port of Washington, some places in Oregon, we're talking about 80% coming in from China. The other 20% coming in from the Philippines, Thailand, Japan, Vietnam, and other Anticin countries. But at the end of the day, it's minimal. Why do we rely on China? Mainly availability and pricing. So we are experiencing what we are experiencing because we're looking to lower our costs, and mainly because we all have to admit we're a massive, massive consumer culture. Here are some real actual pictures that were taken from the air of the Port of Los Angeles. All those container vessels are packed. Keep in mind that every single day, a new larger and larger container vessel comes in. So you have containers in there that have 20,000 TEUs, which is equivalent to 20,000 20-foot containers on board. I mean, that's a lot, a lot to go on. And all of these commodities that are coming into the U.S. are either waiting outside. They're also going into the port slowly, and then they have to wait for the trucking industry to come in and play. That's when inland marine starts. It will affect three main aspects of inland marine that we will be discussing. Obviously construction, motor truck cargo, warehouse legal, and definitely will affect other adjacent lines of business. I was taught as a junior underwriter that inland marine is the land of misfits lines of business. So everything that doesn't fit the spectrum of property casualty, professional lines, financial lines, all of that will end up with us. So the spectrum is enormous. I mean, within inland marine, there are more lines of business than any other segment of the industry. So for me, the supply chain and the lines of business offered by inland marine are very, very, very tight together. And how can they be affected is very important. So I always put the toilet paper roll there because believe it or not, toilet paper has been used as the measuring stick to what has happened. Now that we can look at it in retrospect, we can see toilet paper as the reaction that the United States had towards COVID-19 when it comes to supply and demand. So the COVID-19 pandemic started by the summer of 2021. We started having all of these problems with shortage. The initial response of the consumer in the United States was panic. So they started buying, buying, buying, buying nonstop everything that they could afford. So again, I go back and say that gives us an idea of how do we react to a simple change within an ecosystem. We become very, very heavy duty consumer driven. So the toilet paper dilemma started when fake news appeared that there were certain types of things that could happen to the body if you get COVID. They were not true, but people don't care. It's very important that we understand that the consumer doesn't care. The consumer wants the product in. But what happened in a country like the United States when the product is just simply not coming in? Or when all of a sudden, all of the things that couldn't come in, come in at once. And that's when we started seeing the problem. Because a lot of us could do with, you know, toilet paper. A lot of us could do with other materials for certain constructions and similar things. But at the end of the day, when the doors open, and we realized that from an infrastructure perspective, we were so unready for this type of shift in the ecosystem of the supply chain. And I always use the word ecosystem because supply chain is as delicate as we can imagine. It is as delicate as a rainforest. Anything can alter it. So we look for those variances, those changes, and we try to learn from those lessons. And obviously, we won't learn from everything. We won't see everything. We won't capture everything. But everything that can be captured, that will affect our industry, I think it's a point of discussion that most certainly has to be had. One of the main concerns that people had is, you know, well, it's very tough to go to my TVS of choice, to give you an example, open the ice cream section and see that my ice cream Snickers are not there. I don't know about you guys, but for me, that was a big deal. And for my wife, it was a big deal because she had to tolerate it without my Snickers. So it's those small things that we don't see on a daily basis, but are things that actually are affecting us. And that is entirely spilling into insurance and affecting insurance as a whole. So a quick construction poll that's designed for us to understand how much is our dependency international. So how much building material was imported from the US to the US from China? So in this case, it's $36.5 billion worth of merchandise, which if we try to put that into perspective, we're talking a lot of construction equipment, material, lumber, even lumber is being imported for certain places in Asia. Every single screw, every single nail, every single hammer, all of that is being imported either from China, Asia, or similar places. So what does that tell us about the construction and the builder's risk environment? So in the past, a small construction project could take eight months. Well, now it's taking 24. And how does that affect this? Well, simple. We have the exposure being prolonged. We have policies being extended for a period that should have been 12 months, now being extended to 12. Why? Because the supply is not there. The demand is there, but the supply is not there. So every single nail, every single screw, every single lumber, every single piece of anything that comes into that project that will be installed in those houses as the construction starts, all of that is missing. So we have continuous delays on our projects. And the more time a project is open, the same thing as cargo, the more time the goods are in transit, the more exposure you have as a company, and the more you need to think about this. We also need to understand that we are given tools to underwrite, but we need to evolve every single day. And the reason why is forthcoming. I mean, and it's the domino effect that COVID had. So first and foremost, everything started like a tsunami. The waters receded. There was no supply, even though the demand in the U.S. continued to be extremely high. The reasons for that is because all of the ports in China were closed. So vessels weren't able to go into China, unload, and unload, and load entirely to come back to the United States. So after that, when it did open, we started seeing our first problem, lost or damaged during delays. So we had a lot of vessels packed with containers waiting in front of the ports. They're laden with cargo, some of it perishable, some of it susceptible to mold, mildew. While we do not cover mainly delay in any of the lines of business, the amount of time that a particular good takes to move from point A to point B will determine in a big, big manner how much of a risk do we have or how long our tail in that risk will be. So a lot could happen to these goods even before they arrive, even before they become our problem. So we need to start thinking in retrospect and understanding that our problem started about 5,000 to 6,000 miles away, and it continued all the way to the ports that we serve today as part of the United States. So what happens then? The ports have to accumulate all of these containers. So while we're not there yet in the inland marine, on the marine side, it's a big, big problem. Why? Because the more accumulations in any given plot, any catastrophe can come in and destroy. So the more things you have combined together, the more probability of one loss. In fact, if we go back around 4,500 years in the Yellow River in China, they realized that if they put the rice separated among four canoes or four rafts as opposed to one, if they lose one canoe, they don't lose the whole shipment. So that's contrary to what we're doing here. That was the beginnings of risk management and loss control, but what we're seeing here is that loss control and risk management can't do anything about it. So what happens next? Now we start going into the inland marine, for those of you who do motor truck cargo legal liability and warehouse legal liability. So we have overworked veteran truckers, and we have unexperienced workers truckers. We saw industry-wise an uptick in claims related to hitting bridges, overturning, fires, low maintaining of the back brakes of the trailer, all of those things. But when we pinpointed that, we realized that a lot of times we had a trucker that was nonstop for two months, moving things in and out of the ports of Los Angeles and other places. And the biggest shock was that a lot of those claims are related to 21-year-old trucking drivers. So we can't expect new people to come into the industry, but we need to make sure that those people have the enough education and understanding of trucking. Another problem that we were having is that anybody can go and pick any container. The reality is that some containers are specialized commodities moved by specialized truckers. This was free for all. We didn't have the luxury of sending a particular trucker to get a particular container. Truckers were going in, getting what they're getting, this is the destination, or a center of distribution where other truckers are going to pick them up and move them across the United States. We also started seeing this in Europe, but it wasn't as intense as it was on the West Coast. That's definitely for sure. So you have your young drivers, your overworked, experienced drivers, which aren't both hazards on their own. So is this something that we need to take into account when we start underwriting a motor truck cargo? Absolutely. We're not going to be seeing the same workforce. We're not going to be seeing the same people distributed geographically, nor the work distributed evenly. So a lot of things that we need to take into account. We move into the warehouse side. I mean, supply chain is from point A to point B, but a lot of things happen in between. So a lot of these goods go into a warehouse in which a warehouse operator will manage the in and out, the turnover of goods. But what happens when there are not enough warehouses for the supply that's coming in to satisfy the demand, or the way that coming in land? So for example, one of those fond claims that I've seen was we had a small box and the box didn't say much. We found out that there was a loss of that box. We watched the cameras and we started seeing that two 18 year old being hired to try to maintain the warehouse up in 24 seven with zero experience in warehousing, handling a specific commodity or anything like that. We're simply playing soccer with that box. So that box was filled, a small box with about $250,000 worth of syringes, specific syringes for kids when the vaccine started being applied to kids. So these are the types of things that we cannot control. There's so many, many, many, many variables, but that we at least are aware that they exist so that we can underwrite accordingly. We can start adding these variables and I go back to the system. Systems and forms many times are boilerplate. They tell us what to do and then we give the underwriter consideration. But in my opinion, they should never ever come across you and your instincts as an underwriter. That is extremely, extremely important. Follow your gut because there's a lot of new variables. New things coming in. The systems cannot keep up. So what are the effects of the insurance industry? So underwriters mostly vote on a daily basis. These variables that we've just spoken are four or five variables. We're seeing hundreds and hundreds of different things like we've never seen coming into play right now. So if we do not evolve like any other ecosystem, we're going to get extinct. Somewhere or another, we're going to fail. So we need to be very, very vigilant and we need to be in pure communication with our claims departments, asking them to let us know if they're seeing new stuff, new trends, new things that we can mitigate on the underwriting side. So I always, always, always tell my team it's very, very important that there is pure communication between underwriting and claims because claim can give you the answer if you're underwriting. And as we see this variable progress and evolve themselves, we actually need to evolve with them. And not only the variables, a lot that comes behind it. So how are we seeking risks with these added variables? I mean, we're seeing these risks in a whole new light, an entire new light. Who would have expected that you're looking at cab drivers, you're looking at similar things, everything pans out, everything looks good, but all of a sudden, we're going to have a massive shortage of truckers. So we have, in other words, a small amount of truckers in a big hurry. I mean, that's never been the case. We always have the workforce and it's one of the most important workforce in the United States. And the reason I say this is for a matter of comparison, like I said earlier, the insurance industry employs 2.5 million employees across the United States and some dependency islands. That's underwriters, technical assistants, the whole thing. But it represents about 3% of the GDP. And for the first time since 2017, it actually beat the GDP of the banking industry. But more importantly, logistics, supply chain, trucking, all of that represent 10% of the GDP of the United States. It's one of the highest dependencies that we have. So it's very important that we keep this industry sound and give the importance to these truckers that they do this service. Also try to help those that are coming in. So what new types of losses are we seeing? Again, we saw a trend in July and August of last year of trucks hitting bridges. That's nothing new, but when you see it kind of coming up nonstop, you start to look at the data. And when you look at the data, you realize that 21-year-olds were behind many, many of those accidents. So what can we do? We need to start focusing on educational system for these new truckers coming into the industry. And I'm all for it. I think we need the workforce. But I think we need the workforce to be properly educated in what they're doing and understand what they're carrying. That's something that we had in the past that we definitely do not have now. How does this affect us directly? Let's go from line of business. You've seen these three lines of business for the purpose of this presentation. So going to truck driver legal liability. We have truckers that do not understand the commodities they're moving. We have truckers that haven't been educated in the laws and everything that comes with being a trucker. I'll just say to apply, moving from point A to point B, taking specific routes for specific commodities, taking specific measures in winter, all of that is impacting the losses on the motor truck cargo side. What can we do about it? That's what we have to get creative. We have to be able to communicate. And when I say communicate, it's not between carriers communicating, brokers communicating, clients communicating. We need to all communicate. We need to all understand the problems so that we can all find a solution for that problem. Because right now it's getting very, very bad. A lot of carriers haven't seen the effects of this, but they will see those. Another direct impact, warehousers legal liability, like with this cost. Warehouse operators legal liability depends on multiple contracts. Now if you don't have a contract, you need to use a warehouse receipt. So there is actually no limit to what they can put inside that contract. I was in a conversation with a team member that was telling me a lot of people who cannot put things inside their warehouses aren't even renting containers to start filling those containers with stuff all the way in so that they can have additional space for what's coming in. That's a new type of risk because it's not open a lot because it's not exposed, but at the same time, security measures, fire measures. Are the correct commodities being put in the correct place? Is the correct contractor's equipment being used to actually move these commodities? Is the person moving this actually a person that understands what they're doing? So a lot of effects. In the construction industry, builder's risk, like we mentioned earlier, we have a plan, we have the contractors, everything's set up to start, but we don't have the material. The material is simply not coming in. What's coming in is coming in delayed. What we need now is coming in later. What we need later is coming in now. So there's a lot of adaptability to what they can do, and we need to adapt with them so that we can help them in that way. Understanding that from now on, when we see a submission, for example, saying this project will last eight months, this is the value. Yeah. We don't think it's really going to last 12 months, and we need to have in our heads, there's a very big chance that this can't be extended. So another variable that we need to take care of when we are underwriting, especially on Inland Marine, and how can it affect our loss ratio, our gross loss ratio if we get it combined, and what can we do to mitigate it? How can we add that into what we do on a daily basis by means of wording or anything like that? There are many ways to skin that cat, but in reality, how can we help the industry not struggle? In the past, a lot of companies have moved out of specific Inland Marine spaces because all of this was all of a sudden, there was no space to maneuver and adapt. So if we start seeing this and learning from this, and we start adapting now slowly, by the time we start seeing this, we've been evolved enough to understand the new risks that are coming, and understand that if we don't evolve like any other ecosystem, we're going to, let's just put it in nice words, we're going to mess up. There's also the evolutions in law. I mean, for a merger partner, we use Karmack Amendment, for international shipping, we use Garage of Goods by SEAC, for air shipments, we use Warsaw Convention, Montreal Amendment. There are so many laws that are applicable to construction, to environmental, so many lines of business that are changing daily, and we're not taking care of making sure that we are looking. So one of the things that IMUA does best is actually taking a look at all of these changes, making sure that the industry is actually moving along in line with the regulations from the United States. Now, important to understand that we need to help them as much as possible, and we need to help our underwriter and underwriting peers as much as possible. The evolution of what we consider now laws, like the Karmack Amendment for motor truck cargo, it's going to eventually evolve, and it needs to evolve to actually fit to the days that we're living today, to the problems that we're seeing today. We need to understand that the law will dictate a lot in England. Marine is a type of business that, in some cases, is highly regulated. In some cases, it's left alone, mainly because of lack of understanding. Not because it's not regulatable, if that's a word, but because of lack of understanding from the people who actually are supposed to be watching the head house. So be wary of new laws coming in the near future, laws that can impact us as well. We saw a lot in the trucking industry, a lot of laws coming in in the past two years that affected a lot of people. We see state laws, like, for example, in California, that affect the way a trucking company can be incorporated, not to mention builders' risk in California and all the environmental implications and additional laws that could, you know, delay projects, make the underwriting process a little bit more difficult, as we have to rely on a lot of guesswork. So we're going to our trucking poll. What is the number of truckers in the U.S. moving merchandise at any given moment? So, there are actually 3.5 million truckers in the United States. There were about 4 million about a year ago. The interesting thing about this is that keep in mind that these people move everything across the United States. The type of work that they do is not the type of work that we do. The insurance industry has some 2.7 million employees in the United States. That involves a lot of health stuff that we really, really, really don't like even talking about. So, keeping in mind that difference, 3.5 million dollars truckers at any given point in the street. Well, the fun fact is that there are 15 million trucks ready to be used. So, that tells you a lot about the shortage that we're having in terms of workforce. We have about 12.5 million trucks not being utilized right now. That could definitely alleviate the supply chain issues that we're having that is affecting builders' risk, that is affecting the same retail cargo, same warehouse legal, and all the lines within the inland marine industry that definitely can benefit from a fast-paced economy and a fast-paced supply chain. So, all of those things are extremely important to know. At any given moment, there are 3.5 million people out there moving stuff so that we can eat, so that we can go to CBS, so that we can go to the supermarket, so that we can take our medications. So, when you see a lot of what's going on with the trucking industry, a lot of people that are restless, tired, we need to start looking at this a little bit more in detail. Now, a lot of newcomers are coming in, and I'll repeat what I said earlier. We need to invest a lot more in educating them because we keep surrogating the problem that we already have, and we're making it a lot worse. But that's something very important that we need to keep in mind when we are underwriting. How much time are these goods are going to be in 0.8 to 0.7? How long will it take for the material for construction to arrive? And be a little bit more skeptic and pragmatic and have the facts in hand. And, you know, a lot of times, question, question, and question. Same with the broker. Same the broker does with the client to make sure they can provide the best possible options. The underwriter needs to question the broker, and it has to be a fluid relationship so that we can get every single fact out there. A lot is changing, and we really need to move fast on this. So it affects us all on all lines of business. No hiding, no use. I mean, supply chain, as I mentioned, represent 2.2 trillion dollars and expected to reach 3 trillion dollars in revenue by next year. So what does that mean? The more it encompasses part of the GED, the more it will touch every single segment of any industry in the United States, but in the insurance side particularly, could make us or destroy us. So what things can we do? We can stop hiding and hit it face front, you know, try to understand it and try to mitigate it, try to evolve with it and try to come at the other side. Perfectly fine. Or we can just look at it fast. But looking at it fast, it's a gamble because there is no end in sight. Unfortunately, there's no end in sight. And there's another wave coming. So how are pricing mechanisms evolving? Like we mentioned earlier, pricing mechanisms are designed to take X variables into account. They're not designed to replace the underwriter. They're not designed to replace the underwriter when the underwriter captures additional variables that he thinks might affect the risk. The same with a broker. Brokers have to be vigilant because the risk on itself is actually evolving every single second. So all of the systems that are boiling plates, it's very important that we trust them. But at the same time, we understand that we need to use a little bit of our gut. We need to understand the risk and use our underwriting discretions within these systems to the best of our ability, either up and down. It doesn't matter for this presentation, but it has to actually encompass the necessity of the client while at the same time protecting the bottom line of the character. So it's kind of a game of balance. I always love to use the term evolution survival of the fittest as it applies to insurance, because it definitely does. Even if we go back to the trucking industry, we realize from the pandemic that trucking companies that specialized in a particular type of things were absorbed by higher barrier companies and were in financial trouble three months into the pandemic. Why? Because they were only moving steel. Steel was in so short, so large demand, but so short supply, to give one example, that this particular steel movers find themselves without a job. They had nothing to do. So in nature, when you're a specialist, you're deemed to fail in eventuality of any small change. So that's why I like to use the comparison. But also in some cases, and I use the extension of the dinosaurs, the mammal came back because they were small, they were nimble. So we tried to use the insurance industry as we're extremely specialized within the inland marine segment. How could this affect us, or can we specialize even more by adding these variables and having a more complete and holistic view of what we do on a daily basis, so that we don't go through that specialized species gets extinct all the time across this kind of thing. I mean, we can no longer take for granted the information that we're giving. It's very important that we come to our own conclusions. Some people mess like, I'm going to check something on Dr. Google. I mean, yes, Dr. Google thinks I'm pregnant. Most of the times when I put my symptoms, except when I actually put on a meal. But at the same time, we can find additional information statistics. And this statistics will tell us a lot about how a risk will behave. Data is key. You know, it's so important to have the data. But at the same time, we need to understand that data is in the past tense. It only comes to the present when it's being created, and there's no data for the future. So we had to go to the past to try to understand the future. We can no longer take for granted what we do. We can no longer take for granted what the number that the system is giving us. And say, OK, I'm going to clean my hands with that, because the reality is that the risk is not contemplated in its entirety when we do that. And we need to be a little bit more vigilant and understand the risk, live the risk. Think of all the things that could happen. When I was 18 years old, I got extremely bored and I started creating a model system for cargo. I ended up giving up. I ended up giving up because I got to 33,000 variables and I knew that I have about 70,000 more to go. What did I learn? That there's a lot of things that could go wrong. I've got a lot of things that could go right. For one nail to come from China to the United States, so many things have to happen correctly for it not to get damaged in transit. So it's very important we don't take for granted either the information that we're giving or neither variables that weren't here in the past. They are coming and we need to be very vigilant about that, especially in the underwriting process, especially as you see carriers trying to push for profitability. And to that effect, in the 1990s, it was OK to have 105 combined loss ratio. Why? Because you were making 25, 20% on investment income. So at the end of the day, your combined loss ratio was lower to 85. That was the golden 90s. That's long gone. Insurance companies should focus on underwriting profitability. That's what we do for a living and we should keep to it. And it's very, very important that we maintain that line of communication that I always say between client and broker and that we all work together. There's always been these barriers for me between brokerage, the carrier, the client, that it's kind of it's linear. And in reality, it shouldn't be linear. It should actually be a circle. And everybody can contribute to that circle. The type of client that's willing to engage, that broker that's willing to get creative with you, finding a way to mitigate losses, not only that, help the client always. If you come up with an idea, it's creative. It will help the client go ahead and move forward with it because at the end of the day, it will help your balance sheet. It will help your loss ratio. It takes more work, though. That's for sure, but definitely worth it. So have we learned our lessons? The reality is that we have not. We continue to have massive, massive dependencies on international places, specific places in reality, like China, Southeast Asia, and similar. And the problem with that is not that they're China or Japan. That really doesn't matter. They make good products for a fair price. Some of them not so good, but again, for a fair price. So we have to depend to some level on raw material that is just simply not local. So what happens when those places close? Right now, the port of Shanghai is opening its doors for the first time in a month and a half. It has been closed. If you look at an aerial map using Vessel Viewer, you will realize that there are more than 100,000 vessels outside of Shanghai. Those vessels are only there to drop some material and to get packed up to come to the United States. So that's why I said another wave is coming. For those doing monotrope cargo legal liability, another reason to be vigilant because another wave of 21-year-olds are going to come in. What can we do to help them? And we'll talk about that in the next slide because it's extremely important that we do our part. Our livelihoods depend on the livelihood of the value chain. For us, it's very important to achieve profitability while at the same time giving the service necessary to the broker, making the broker look good, protecting the bottom line, and making sure that the client is well protected. There have to be caveats, wording, similar things that you can always use to make sure that everybody has a skin in the game. It's important that the client also has a skin in the game. That makes it for a true partnership where not everybody's happy. So these dependencies on China and similar places, I mean, the United States, for example, iron ore. We move a lot of iron ore coming in from China because it's very cheap. Now, we can look north to Canada in which north of the badlands, you have some iron deposits. We have small iron deposits in North Carolina. We have massive iron deposits in the north of Mexico. We have enormous iron deposits in Brazil. Why are we not importing from there and keep doing the same thing? Money. It's a lot, a lot, a lot cheaper to import from China. Now, we need to understand that we get for what we pay. So when we are in the middle of a construction project and it's made out of steel, and the steel actually cracks on its own way, we need to understand that that steel wasn't made correctly. The stress wasn't made to handle the stress. Why? Because the ore was probably mixed with certain things. It's not pure. So a lot of things that to take into account, we have all so many avenues to take when it comes to importing that we're just not tapping into the infrastructure of the United States. So the Port of LA and Long Beach combined are always on the top 10, between 5 and 10, usually largest ports in the world. So we're talking about the United States of America. The number one power, militarily, economically, the standard for the dollar. so forex, currency, we're the standard for everything. There's a lot that we need to learn from our counterparts in Asia, our counterparts in the Middle East, our counterparts in Europe, specifically in the Baltic Sea, places like Hamburg. We no longer have the infrastructure to actually service the supply that is coming as a result of a massive demand from a buying culture that we are. That's who we are. That's very difficult to change. The only thing that we can do is try to make our infrastructure in a way that it works better. Some of the things proposed, we need to start putting massive railway entries into ports, bigger than what we have right now, and not only for bulk, but we need to start moving containers out of ports, eliminating aggregations as much as possible. We need to be able to bring more truckers into the industry, but we need to educate. We need to be able to sleep at night knowing that at least the trucker moving this merchandise has some level of experience. So, as underwriters, we have to see this and realize the level of experience is not there. So, what can we do to mitigate that? Are we just going to decline it, or can we get a little creative? Can we find a way to meet, you know, common ground with our insurer through our broker? So, superpower materials, like I mentioned, everything that's cheap comes with a price, a price that's hidden, and a lot of times, that price is hidden damage that's already there. What can we do to get creative in this type of instance? How do we not pay claims for things that were already damaged as well, especially on the motor to cargo, on the warehouse, on the construction sites as well? What can we do? I mean, from getting creative, from adding, you know, whatever necessary to make sure that those goods are infected before we take upon the risk, because at the end of the day, very few testings can determine when the loss happened, especially if the goods didn't come by sea, where they are salt and corrosion tests and similar things. Soft part trucking education. I'm all for education. I think that the three main things any country should invest in is education, education, and education, and the reason is because everything bad lowers when there's a lot of education. So, the same applies for trucking. We need to help create think tanks as to how we can help, as to how we can voice to the government, how we can voice to the industry, how the industry can actually pull itself together to work together. And by industry, again, I don't mean carriers. I mean carriers, brokers, clients, everybody involved in the industry. How can we get together to help these 21-year-olds get the education that they need to make sure that they have zero accidents, a lower probability of losing their lives, of losing merchandise. All of these things come into play. We need to invest, and we need to, unfortunately, as an industry, we can't depend on government. We can't depend on anything. So, we need to move ourselves. We need to find solutions for this type of problem, even if we have to take the initiative. I always say, Johnny Rantan, we do have a long way to go, and it's not a negative statement. It's a pragmatic statement. There is no way that we have learned our lesson yet, and the reason is because this is the first time that it happened, and I don't know you guys, but as a child, I learned the hard way. Why? Because it wasn't fun. It's like the guy, somebody would tell me, do not push that red button. There's no way in hell I'm not going to push that red button. So, we do have a long way to go so that we can start educating ourselves, educating others, understanding that underwriting is not static. I mean, it's in no way static. It's something that we need to evolve into. We need to start seeing these variables, be more involved in our jobs on a daily basis, be more dynamic. When I started underwriting, and I was actually a YACHT MP&I underwriter trainee, I was 16. Facebook was a source of underwriting. Google was a sort of underwriting. Why? Because I was doing YACHT. I could see them partying in the islands next to Puerto Rico, and I knew that wasn't the type of client I want. I used every single thing that I can find as a resource for me to be more educated when I'm doing any underwriting. Even before I get to the rating process, understanding the risk, understanding how supply chain is now affecting something that in reality, the root of the problem might be 5,000 miles away, but in reality, it's already affecting us here. It's a global thing. And I know that Europe is doing the same thing, trying to understand. And now with the war in Ukraine, I mean, it's such a fragile ecosystem that you change one thing, GDPs drop, people lose their jobs. I mean, COVID was a massive learning exercise for a lot of us in understanding that even a virus can destroy an industry that's not related to a virus. And by definition, the ones that we are exclude those viruses, exclude those types of problems, and now are being excluded even more because re-insurers are requesting carriers to actually include them in their policies. So how a virus actually came into play here, it's very interesting to see how the supply chain also has a chain effect that will come and touch us all. And there's no doubt about that. One of the things we need to do is give it time, but not rest on our laurels, kind of give it time. More us, we need to give it time, but at the same time, think about it and see ways that we can do to mitigate this type of problem. Is this a new normal? Is this a phase? That's a very tough question to answer. I know for a fact that it happened in the summer of 2021, and it's about to happen now that Chang'an opened. We're going to have the same trucking problems. We're going to have the same 29,000 containers coming through California. In that case, the problem is not that the material is not in the US to start construction, it's that the material can't get to the construction. There's not enough people to move that to the construction side. So what is the US doing to mitigate? How can we help? So the US is proposing certain changes, adding certain additional ports or centres of distribution. But I think one of the most important initiatives is distributing the places we import from, understanding that we have neighbours on the north, neighbours on the south, neighbours on the east, and continue the relationship with China from a trading perspective, but at the same time start applying different niches, different places where you can actually get the same material and keep the machine rolling as opposed to having the machine have to stop, wait, learn, and then move again with what's learned again. So we're going to go through this process again in the next few months as all of those ships come in. We're going to start seeing delays in construction, losses in motor truck cargo, losses in warehouse legal liability. The only thing we can do from the insurance perspective is add the necessary word, the necessary caveat, but more importantly, the necessary line of communication between broker and client, and work the three of you together. Understand the risk is the only way you can mitigate the risk. And I go back to education, education, education, this time of the underwriter. And this and eliminating generational gaps come together. One thing that I was always told is learn as a protege of the person that taught you insurance. But like any other conversation, you should take from that what you need. You need to make a roll. I remember having a boss who told me, I will never do perishables and motor truck cargo because that's lost, lost, lost, nonstop. So I went and looked at the data. In reality, electronics were a lot more of a concern to me than perishable goods. So we learn from the people that taught us, but it's very important that we learn our own things. And many of the times it's from our own mistakes, and that's even the best way to learn, for a guy like me at least. Eliminating generational gaps. We need to take people under our wings, young people, people without ego, without bad habits, without anything, people just fresh out of college. In some cases, and even when I was in Puerto Rico, I didn't hire underwriters from other companies. I hired boat captains. I hired people from exports and imports, people from customs. Those were my underwriters because it's easy to teach insurance. It's very difficult to understand the trade that you're insuring. And if you live and understand the trade that you're insuring, definitely will mitigate losses. So it is, I think, continued upon us to actually try to find a way in which we can bring younger people into, I mean, nobody grows up saying I'm going to be an insurance underwriter. I don't know you guys, but I was going to be so many other things. So we need to bring more people, attract more people, make the insurance industry a lot more attractive, make it fun, make it in some way or another something that somebody wants to aspire to do. Take those young people without any egos, any bad habits, and turn them into phenomenal underwriters that will then go on their own, make their own mistakes and learn on their own. So is the U.S. Inland Marine underwriter ready? The truth is that we're not ready. I'm not ready. I'm still learning. I started to look at a lot of the things that have happened in the past few years and try to make sense of it. And you can only say it was predictable after it happened, but the reality is that it wasn't predictable. We didn't understand how one simple virus that, yes, did a lot of damage to humanity itself, but how a simple virus could definitely affect the blood veins that are of the world, the supply chain, the logistics. If we see as part of our underwriting on Inland Marine, the importance of logistics, if we give it the importance it needs, we understand that we are using data from 10 percent of our GDP to understand our own risks, what things could happen. And it helps you predict the future, what happened last summer, helping you predict that it's going to happen this summer again. So we are destined to learn the hard way. I think, again, that's one of the best ways to learn, but we do have some time to go. We have to give it time and we have to take action, but we will be ready. And the insurance industry in the United States is resilient, it's well-managed, it's well-organized, it's well-controlled. And I think we're on the right path to try to minimize all of the situations that come with evolving. Nobody likes change, but change is definitely here. So with that, guys, I will leave it open to any questions you guys might have. I think, what are the 500,000 pure troopers this year over last year? There was a massive generational gap, the same gap that we were having on the underwriting side, that was happening also on the trucking side. So you have people retired, people just too tired to continue. And then you have a 30, 40 year age gap, and then you have your newcomers coming in. So a lot of people retired, the supply of new people coming up wasn't enough. It will eventually go up, but it does need a lot of help to go up. And the people who are starting, we want to keep them as truckers, not change careers when things get very tough like it did last year. So again, going back to education. All right, thank you so much for that, Alex. So this is our final Q&A. Remember to please use the Q&A box to type in your questions, and then we'll see them and Alex can address them. And remember that we do have two potential Amazon gift cards up for grabs. So please, for the most engaged with the best question, so please type in those questions and send them off to Alex. Does the IMUA lobby on behalf of the Industry Specialist in Fresno? That's a question that I cannot answer. Okay. So, IMUA does not lobby, but we do have occasionally done amicus briefs or, you know, the main purpose of IMUA is to serve as a voice for the inland marine insurance industry, but we do so without doing any lobbying. Yeah. So, another question. Do you find regional differences in the attrition of choppers? Example, more east than west. Definitely. And the word attrition, I think, is a fantastic word, Mark. We see it more on the places where we need them the most. And a lot of times it's a very difficult balance because sometimes the government will put some difficult, you know, things in the middle. Many of them do make sense in the long run and something that I think we're trying to mitigate last year. But, yeah, the west coast saw a lot of the old timers that were phenomenal choppers going up. But I also have seen clients that are freight brokers that have come to me and tell me in the middle of Indiana, we're lacking in trucks. We're subcontracting 99% of what we're doing. Another key thing that I didn't mention earlier and to come into place here is what, when we quote an account that is based on gross receipts and we all of a sudden next year receive that account and we have the gross receipts and we see that they're doubled, but when we look at the amount of shipments for a monetary partner, we see that they're the same. So, another big thing here is inflation. When it comes to inflation, and I'm digressing a little bit from the question, I hope I answered you, mainly west coast. But the thing about inflation is that when we talk about inflation and how the Fed is upping the rates so that people have a little bit less access to supply, so the demand slows a little bit, so that prices start to come down as people don't need things anymore or don't want to pay for things anymore. We have to include supply chain and how does supply chain actually helps with inflation. And if supply chain is not sound and it's meeting the demand, the supply of the demand, there is going to be inflation, but mainly because there's a lack of material. You mentioned the criticality of enlisting new drivers. Any ideas of how to do it? Of course, many, many, many, many ways. I mean, there are so many trucking associations, so many affinity groups related to trucking. I mean, approaching them, understanding what they're doing, talking to them, bringing this type of seminar to them, telling them how do we help, how can we educate them. I mean, if you're an underwriter and you specialise in inland marine or you own a particular commodity, let's say, I don't know, steel or anything, or you specialise in refrigerated warehouse or refrigerated truck and similar things, why don't you go out there and what you've learned through the years, grab some of these associations and tell them, I'm willing to give your 100 youngest truckers a free seminar based on ferry troubles, refrigerated movements, Celsius versus Fahrenheit, which is the number one cause for losses in logistics. All of the things that can actually change. We can reach out there and try to help. And every time that, for example, I've been approached for similar things, and my workplace does a good job at actually trying to send, using new technical media and similar things, to send additional, how do I put this, additional methods of education out there that we can actually bring to the younger generations. I mean, we're talking about millennials here. We're talking about people who were born after 1983, that changed. We just do a 1987, and it's 1983. So, we're looking at a lot of millennials coming in and even post-millennials coming into the trucking industry. So, their experience in trucking is minimal. It's an easy way to find a job, but at the same time, it's an easy way to destroy a lot of things. So, the more proactive we get, the better. Are there ports outside of LA that have more advanced infrastructure support that could be brought to the imports and help alleviate supply chain issues if so, where? Well, not necessarily have better, but do exist. So, not necessarily have better infrastructure. There are more modern ports, but a lot of rerouting was done in the past wave, but it didn't take as far. The reality of the thing is that even if we distributed everything among all types of ports, goods were going to be staying in the ports for the long run because there were no truckers to pick them up either there or here. So, we can solve that problem by moving things and trying to disperse the entry of goods through the United States, but at the end of the day, after they enter and they're parked in the port, that's that. The problem persists to another level. And a lot was transferred from LA, Long Beach to Oregon. And funny enough, a lot of people were actually chartering vessels, the whole vessel, but mainly bigger companies like Home Depot, Walmart, and similar, so that they can actually send the goods to northern Mexico ports and then send them by rail all the way north to the United States. So, even that measures were taken. Amazing presentation, Alex. Do you plan on hosting a seminar? I appreciate it. Absolutely, any seminar that we have. And where I work, we do a lot of them and we have a lot of them recorded, so anything we can do to help the industry, that's our main focus. We are all in the same boat at the end of the day. It doesn't matter what we do within Inland Marine, we're all in the same boat. We're all going to see the same variables, suffer the same losses. Hopefully in 20 years left, I don't worry about those losses and how they used to pass and how we evolved into it. But yeah, I think small seminars like this, anything that helps the underwriter get a little bit more comfortable with what they do, I think it's fantastic. You mentioned the critical of enlisting new drivers. Any ideas on how? That one I answered already. Lillian, I'm not seeing additional questions, am I correct? There are a lot of questions. Why am I not seeing them all? I'm seeing them with small. Oh, here we go. Okay, yeah. Let's just say here we went. I'm trying to delete them as you go, but I know I need a couple of them. Okay, I'll start deleting them. Okay, so let's go here. Are you expecting higher loss ratios in MTC and warehouse legal liability? How high will loss ratio go? How long can we expect elevated levels? Will insurance companies start to pull capacity as they expect higher loss ratios? So the capacity question is very important because for the first time in the past few years, we've seen more capacity going out than in. So rates have been outperforming the entry of capacity, meaning that we continue to have a hard market in those lines of business. But that means that, yes, you can get additional premium rate, terms condition, whatever you need for specific accounts. But the loss trend will continue as long as we let it. So if we start evolving and start thinking in monetary cargo, okay, we have this new variable. So let me go and check what else is out there because I'm just telling you the ones that are created by supply chain issues that were actually activated by COVID, but there are many other things out there. And creativeness, understanding. Yes, I think that they will go up while we start, while we capture our learning curve and get it down the same way. I don't think, and again, I say it's going to last as long as we let it. Broker, client alike, pure communication will definitely lower this. And it's, we have to take underwriting a little bit more personal. We have to take underwriting a little bit less volume. Volume, if that is a question, I invent 20 questions per second. It's 20 words per second. So we need to stop seeing as volume and understanding each particular risk, understanding the variables to that risk. Am I the adequate underwriter for this risk? We need to also take that into account. We can't let ego play a role there. How can I, as an underwriter, understand better this risk? Involve other underwriters. I have conversations with underwriters from all across the United States, South America, similar things, in which we're in a bar and we're talking about war stories and what we call war stories or big losses stories. And it's like, I can't believe that happened to me. But in that past, in that moment, it would have happened because we didn't know that those variables. We didn't understand it. So I think from the perspective of losses, yes, we can. I'm not sure if companies are going to pull capacity out. Many have already, and we've seen it in the past two, four years. When ASLE started, and we don't only do Inland Marine, many lines, we had nine main competitors. We only have four right now. I mean, a lot of capacity was pushed out big time. And the reason is mainly because a lot was painted with a broad brush. So even though some Inland Marine lines were performing beautifully, some were not. Instead of eliminating the ones that were not, it was painted with a broad brush and the whole Inland Marine department went away. So I think, as long as the market continues to solidify, as long as we continue to actually give the respect that we need to give to each individual account and try as much as we can to treat them as what they are, a particular account or two accounts are the same, no boilerplating anymore, I think we will be good. I don't know how long it will last, but it will be hand-in-hand with the supply chain solution problem. Sorry, that's for sure. And besides confirming that supplies are not damaged prior to arriving to a construction site, what can we do to ask underwriters to eliminate the negative effects of supply chain issues may have on our business? Oh, so many things. I mean, the goods being damaged is just the result of the goods being out there for too long or the goods of being not great quality. There are so many, many other things that you can do to mitigate losses. For me, it all started here with the supply chain disruption, but this was only opening a can of worms. It opens to the deficiencies that we have, not only as a country in terms of our supply chain, but as the insurance industry. This negative effects from the supply chain, not only related to delay to quality. In many cases, we have something that we need to add that we usually have it in commercial lines, but on Inland Marine, except for certain jewelers, blog, ATMs or things, there is a new moral hazard. A lot of companies are suffering financially, and that includes construction companies. So not necessarily the owner or anybody will, you know, and I hate using the word moral hazard, but it's existing. So when you read Pink Elephant in the corner, it has to be discussed. Another thing is understanding your client perfectly. There's so many ways to do that. Understand the past of your clients, bankruptcy, similar things so that you understand, am I going to leave it to a private app? Is this guy going to finish the product even though it gets late? Do we have enough liquidity? In terms of motor cargo companies, carrier companies, we're trying to do the same. One of the other things that we're trying to do is not wait for the loss. We try to bring loss control into the practice. And I wasn't a fan of loss controls because loss control people usually were telling me what to do, and I hated that. But at the end of the day, when I moved the ego out of the equation, definitely learned a lot. So prevention of loss is something that's very important here. There's a lot of professionals out there that handle both supply chain cargo and can also handle a lot of inland marine types of flames or situational loss control, risk prevention, risk engineering. I think we need to go back to that. Invest a little bit in that. Yes, we will make a little bit less premium because even though we passed most of the expenses, we might have some expenses there. At the end of the day, I'd rather have a $1 million book with $100,000 in losses than a $100 million book with $200 million in losses. It's all about profitability, even though the margin might go up or down. Do you find regional difference? I think the dynamics have increased in the, okay, so has the dramatic increase in last mile delivery impacted supply chain? Well, last mile delivery's reality is the tail of the supply chain. It's the final, it's the final mile. At the end of the day, it's pretty much the name explained it for itself, but yes. So by the time the goods are right to where they have to be, imagine all of those warehouses that are packed in this last mile deliveries are going to be moving out of those warehouses to more local or concentrated regional areas. The amount of people that were going to be doing that last mile, not only will they have more stops than regular for more commodities that they were moving in the past, they're also going to have to outsource a lot of this. A lot of these companies that are doing last mile delivery are hiring, hiring, hiring nonstop, buying, buying, buying, spring bands, buying all sorts of things nonstop. The reason is because they cannot keep up with what's coming in. That's the tidal wave. Now it's receding, but again, since it will come again, definitely the last mile is going to be impacted. And it's impacted from the A to B, I mean, from point of origin to point of destination. And those guys are responsible to the literal final mile. I think it's going to be impacted. I think it has been impacted from what I've seen personally in my job, as you're going to have to bring a lot of non necessarily, I don't think the word is educated, more like professionals into that realm. People looking to make different types of money, you know, finding solutions. And there's so much hiring here that anybody can get a job at the last mile. So how do you tell a person that has been something in his whole life that now he's moving a box worth $250,000 and that nothing can happen to it? You're definitely going to have, it's, you're sending bulls into glass stores, that's for sure, into China stores. How is the shortage of containers impacting the distribution? That's a phenomenal question, Luisa. So there is, by the way, a massive shortage of containers for many reasons. A lot of it has to do with something called general average. A lot of large ships have had losses at sea. General average has 3,850 years, first mentioned in the Hammurabi Code about 1850 BC. But to save a voyage, some containers have to be thrown to the water so that the rest of the voyage can actually survive. Those people who suffered the loss have to be made whole by those people that have goods in the vessel that did not suffer any loss. It started being called the loss of pottery in Rhodes and Rome, and it's part of the actual man is in there, it's Hammurabi Code, so this has happened for a long time. In the case of today, containers are being thrown in the water, and now those containers that are arriving to port have to be stocked, they can only be taken out in bunds by giving a bond. So a lot of containers are out there, a lot of containers are being lost at sea. We'd have more general average in the past two years than we had in the past 25 years. And as these vessels continue to get bigger and bigger and bigger, we're seeing it more and more and more and more in which they cannot handle the amount of love they have on board. So yes, the lack of containers pretty much is extremely important. It's where most of the things that we import into the United States, the United States actually import more containers than they do on a bulk basis. Los Angeles Port County... Oh, I can see. I'm sorry, Alex. I see we have just two more minutes, so you want to just take one last question, and then we'll wrap up. These are excellent questions. Absolutely. Give me one second. Let me see if I can do it again. Often in the standard carrier market, we stay away from covering consumer electronics, heart liquor, cigarettes, and other target commodities like this. Is there data regarding how target commodities perform versus others, less targets, price? Also are there known carriers that have crafted programs for these target commodities? Absolutely. So you have programs that target refrigerators. You have programs that now in Canada are targeting cannabis, for example, to go to the extreme. You have carriers who will entertain this because they do have a loss control system that works. They have telemetrics. So yes, you can get data, but you can get data for a specific type of loss. For example, in electronics, you'll find out that the majority of the losses in electronic obviously are related to theft, but what other things can happen to electronics? So there's a lot out there online where you can find a lot of statistics about a lot of commodities and what people are doing. Another thing, when you mentioned tobacco alcohol, we can also apply firearms and ammunition is that some carriers, many carriers actually have policies as to not insuring any of the goods. Also have it with coal and high greenhouse materials that are being used. So yes, there are carriers. I know carriers specializing in some particular commodities. There are carriers that have life sciences departments, carriers that have species departments where you can find high valuables, people moving arms only. So yes, for specific commodities, there are definitely specific markets out there. There's always the capacity and the willingness. So that's very important. And I think that's all the time we have. Yes. Thank you so much, Alex. On behalf of IMUA and our San Francisco chapter of the Pacific Coast Advisory Committee, we really appreciate your time and the relevant information that you presented to all of us today. Thank you very much. We have a link to our electronic survey. It is posted in the chat section. So if you just expand the chat section, you should be able to click on that. And if you would please provide your feedback to IMUA, we'll use this feedback to plan future education programs for the association. And also, if you did need a handout, a PDF handout and didn't receive it previously, if you go to the handout section on your control panel, you can download a PDF of the slides that Alex presented today. All right, Alex, do you have any thoughts about who our two winners are? Well, I know there's a person here called Eric Silverman. I think he may want the best questions out there. I think that's one. And the other one, I'll let you choose. I'm just making sure that I don't know anybody that I'm saying the name out loud. Yes. Yes. OK. Excellent. Congratulations, Eric. And Louisa Collins. So our two winners are Eric Silberman and Louisa Collins. Congratulations. But there were a lot of fantastic questions today. They were really... More than I expected. And that's great because there's interaction and I love that. Absolutely. Yes. So we'll send Amazon gift card, $25 Amazon gift card to both of the winners. Thank you to our attendees for your participation and your questions. With ends today's webinar. Until next time. See you later. Bye. Thank you, guys. Be well.

supply chain disruptions

inland marine insurance

COVID-19 effects

understanding disruption root causes

underwriting adaptation

industry evolution

trucking impacts

changing laws

pricing mechanisms

global dependencies

proactive risk mitigation