Tell us about the new data from Chubb's 2023 Middle Market Indicator Mid-Year Report.
Erik Olsen: “Mean revenue growth projections of almost 12% for the next year coupled with high confidence in the economy is exciting. But inflation still remains a top concern so it’s still critical to ensure replacement values and limits are accurate and current. You don’t want to find out you’re underinsured at the time of the loss! Get ahead of it.”
Mike Williams: “The overriding theme in manufacturing is also one of resilient optimism. Even with all the recessionary talk, manufacturers are projecting very positive growth in both revenue and employment. It’s very clear that the geopolitical tensions, along with COVID-19 and supply chain issues have driven reshoring and nearshoring, which continue to be a positive factor in the optimistic outlook.
“The adoption of automation and the continuing growth of connectivity, up and down the supply chain, has been one driver in continuing investments, but it has also increased risks of hacking and resulting ransomware demands. Now, more than ever, manufacturers must be diligent in guarding access to their systems, not only for themselves but also for the protection of their customers and suppliers.”
What growth and challenges has the middle market seen?
Erik Olsen: “It is likely the reality of finding and keeping skilled labour in the face of inflation. The risks around safety, productivity and worker injury (health and safety) get amplified. Companies need to double down on training, worker safety programs, housekeeping, and employee mental health and well-being. For example, ergonomic training can help control the costs of employee injuries and lost productivity.”
Mike Williams: “Growth has been phenomenal over the past several years, driven by consumer demand and the activities associated with reshoring. Part of that has been organic growth, in response to post-pandemic demand and part inflationary. The supply chain weaknesses that have been exposed have presented significant challenges in manufacturer’s efforts to respond to the demand presented over the past several years. This challenge has not only driven reshoring, but also forced manufacturers to evaluate areas such as just in time manufacturing (JIT), automation and the implementation of resilient business continuity plans. Manufacturers who had strong business continuity plans undoubtedly were able to pivot quicker and respond more effectively to significant supply chain issues vs those who had neglected to plan ahead for challenges such as this.
“Arising out of the significant demand and supply chain constraints has been the worst bout of inflation since the 1980s. Manufacturers have been challenged to respond by passing on costs, cutting costs, identifying alternative suppliers and evaluating individual product lines for profitability. What we are seeing develop is a more resilient sector better prepared for the challenges of the backside of the 2020s.”
How can the right insurance coverage help manage that risk?
Erik Olsen: “The right insurance coverage reduces the risk of underinsured buildings, contents, and business interruption limits. The right coverage ensures you also have access to best-in-class risk management tools from risk engineering – whether its property or casualty benchmarking, access to risk engineering, or workers compensation services.”
Mike Williams: “The impact of both supply chain and inflation has challenged manufacturers to properly assess and protect their risk, as never seen before. Not only have the inflationary pressures heightened the difficulty in properly valuing assets, the length in time to receive replacement materials/equipment/commence construction has stretched the time to “get back up and running” after a major loss. Manufacturers may find themselves underinsured for business income coverage, resulting in a challenge in retaining key employees and even risk the ability to return to the same level of operations in the end. It is important for manufacturers to work with their insurance broker to properly evaluate valuations and time to return to normal operations to properly craft their insurance protection.”
How has AI impacted your work?
Erik Olsen: “AI is already being used in process automation to help workers be more productive. It is used to automatically extract critical data from narrative-based reports to allow our workers to focus on more important tasks such as directly helping our customers. We use it to better understand our claims and losses data, and to help customers manage their own risks.”
Mike Williams: “We have found AI to be quite effective in helping to reduce frequency of worker compensation losses in a manufacturing or warehouse setting, utilising video with predictive analytics to not only alert of an actual incident, but more importantly provide training opportunities for “near misses” in an almost real-time basis. ‘Near misses’ happen much more frequently, but have rarely been captured in the past. It’s exciting to work with our customers in utilising cutting edge technology to create a safer workplace for their employees.”
How about climate change?
Erik Olsen: “We love working with our customers to make climate change data actionable to them in pragmatic ways that protect their bottom line – in the face of a warming planet, where natural catastrophic events are growing in intensity and severity, we can help them invest in the best places to mitigate risks and business impacts. We can deliver Property Resilience Assessments now, using the latest climate change models, to help our customers see the future and to look into that crystal ball more clearly than ever before!”
Mike Williams: “Well said by Eric. This is a great example of when manufacturers should work proactively in conjunction with their insurance broker and carrier to evaluate new facilities or expansions to existing ones. We recognise that an assessment of where to locate a new facility will be determined by a number of different factors (availability of skilled labour, logistics, taxes, catastrophe exposure, etc.) and the impact of climate change is merely one of many that must be balanced when making a critical decision on a facility. To us, it’s a very important one and something that we take very seriously, not only thinking of today’s weather but what may be the impact a decade from now.”
What do the next 12 months hold for you and the company?
Erik Olsen: “The next 12 months will bring more demand for understanding climate change risk to businesses, both from a physical assets and a transitional risk perspective, but also as regulatory realities around climate change risk continue to materialise. Insurers will continue to act as the catalyst between these risks and overall ERM at the board level. Expect more insurance engagement around natural hazards and disaster mitigation, prevention and adaptation as it relates to flood, wind, hail, convective storms, wildfire and more.”
Mike Williams: “While we cannot control the world economy, we do expect that the lessons learned and significant impacts of supply chain issues and reshoring will continue to have a positive impact on manufacturing growth in the United States. We will continue to work with our customers to assess risk and make sound business decisions in an extremely challenging environment. From a Chubb perspective, I believe that the global diversification that we enjoy will continue to not only provide stability in the face of these challenges but potentially allow us to find opportunities in areas where our competitors may be forced to retrench or retreat.”
Other magazines that may be of interest - EV magazine.
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