Supply chain disruption is a significant issue that should not be underestimated, according to Zurich.

It can cause lost sales, increased costs, financial penalties and reputational damage, the insurer’s Global Supply Chain Product Leader Nick Wildgoose told a marine insurance forum in Melbourne this morning.

The issue has grown in prominence in recent years, particularly following the Japanese tsunami and Thailand floods in 2011, which “wiped billions off the balance sheets of companies”.

Mr Wildgoose says it is important to consider not only the physical flow of goods around the world, but also information flow, without which supply chains cannot function.

About 73% of companies experience significant supply chain disruptions each year, he says.

It is important to map out supply chains and understand where key suppliers are and what the exposure is.

“Start helping your clients in this critical risk area.”

Mr Wildgoose appeared on a panel that also included John Cupitt, Marine Surveyor with Cerno; Eric Nicholls, Average Adjuster with Nicholls Insurance Consulting; Stuart Hetherington, partner with Colin Biggers & Paisley; and Garry Chalkley, Zurich Claims Technical Lead.

The panel discussed the principle of general average, which has existed for more than 2500 years and involves all parties proportionally sharing losses from the voluntary sacrifice of part of the cargo or ship in an emergency.

Piracy ransoms – which have soared over the past decade – are subject to the general average principle.

“As the pirates get wealthier, they are getting better vessels and they can now get to the whole of the Indian Ocean,” Mr Nicholls said.

He estimates there are about 200 incidents a year in the Gulf of Aden alone.

Mr Chalkley says payment of ransom is considered legal, when taking into account potential loss of life and cargo and the possibility of pollution.

“Ultimately, what Zurich would want to see is that obligations under the policy are met,” he said.

Mr Nicholls says “there hasn’t been one case where a ransom has been paid and the ship and cargo has not been released”.

An increase in military presence and guards on ships has reduced attacks but the problem has shifted to the west African coast.

The panel also discussed the “port of refuge” issue for damaged ships.

States have the right to refuse access, and with ever-larger ships carrying hazardous cargoes it is no surprise when they exercise it.

Mr Hetherington says one ship that suffered damage a year ago is still sitting off the coast of Singapore.

Today’s forum was part of a series of initiatives to highlight Zurich’s marine expertise in Australia. Forums will also be held in Sydney and Brisbane.