Warren Buffett’s next ‘elephant-sized’ acquisition may face antitrust risks after regulators tanked 2 megadeals this month

warren buffett
Warren Buffett.

  • Warren Buffett has been chasing an “elephant-sized” acquisition for years.
  • The investor has seen two huge deals collapse over regulatory concerns this month.
  • Buffett’s company scrapped a $1.7 billion pipeline purchase, while Aon shelved a $30 billion merger.
  • See more stories on Insider’s business page.

Warren Buffett has been hunting for his next “elephant-sized” acquisition for several years now. The famed investor and Berkshire Hathaway CEO may think twice about pulling the trigger after seeing two billion-dollar deals collapse this month.

Berkshire’s energy unit struck a $10 billion deal to buy Dominion Energy’s natural gas transmission and storage business last summer. After completing the bulk of the transaction in November, it scrapped its plan to buy the Questar Pipeline Group from Dominion for $1.7 billion earlier this month. It wasn’t clear whether the purchase would get antitrust clearance from the Federal Trade Commission, Dominion explained in a statement.

The two companies were right to question whether approval would be granted. “It is disappointing that the FTC had to expend significant resources to review this transaction when we previously filed suit in 1995 to block the same combination,” the agency said in a statement. “This is representative of the type of transaction that should not make it out of the boardroom.”

Buffett’s company suffered another blow when Aon terminated its $30 billion merger with Willis Towers Watson this week. Aon, a professional-services firm, was Berkshire’s sole addition to its stock portfolio in the first quarter of this year; it held 4.1 million shares worth $943 million at the end of March.

Like Dominion, Aon nixed its deal because of regulatory concerns, CEO Greg Case said in a statement. The company had hit a brick wall with the Justice Department, as officials didn’t buy Aon’s claim that a merger would accelerate innovation, or that Aon and Willis’ overlapping businesses operated in competitive markets.

There’s no way to know whether either transaction would have been cleared by the Trump administration. Yet it’s clear that the FTC’s new boss, Lisa Khan, is concerned about monopolies and willing to rein in and potentially break up some of the nation’s biggest companies.

Buffett is facing a combination of hefty price tags, fierce competition for acquisitions from private equity firms and SPACs, and tougher antitrust rules. Against that backdrop, the investor could be lugging around his elephant gun for a while yet.

Read the original article on Business Insider

Warren Buffett’s Berkshire Hathaway faces a court battle with Volkswagen after rejecting its Dieselgate settlement deal

warren buffett
Warren Buffett.

  • Warren Buffett’s Berkshire Hathaway is facing a legal clash with Volkswagen.
  • The German carmaker settled with other insurers over Dieselgate, but Berkshire rejected the deal.
  • Volkswagen is now preparing to take legal action against Berkshire to force it to pay up.
  • See more stories on Insider’s business page.

Warren Buffett’s Berkshire Hathaway is facing a legal battle with Volkswagen after rejecting a settlement deal with the German auto giant related to its emissions scandal.

Volkswagen took out a “first excess liability insurance policy” with Berkshire’s international-insurance unit in January, the automaker revealed in an investor document last week. That policy puts Buffett’s company on the hook for up to 50 million euros ($59 million) if a claim exceeds Volkswagen’s 25 million euros’ worth of coverage from its primary insurer, Zurich.

The German automaker had been locked in talks with insurers for years over how much they owed it under various insurance policies following its emissions fiasco. It has now reached a settlement with insurers including AIG and Allianz that will see them pay a total of 270 million euros to Volkswagen, minus payments they’ve already made or scheduled. However, Berkshire refused to sign the agreement.

Volkswagen intends to enforce Berkshire’s insurance obligation “including in court if necessary,” and its supervisory board has “instructed that preparations be made for legal action against Berkshire Hathaway,” the investor document shows.

The automaker added that it won’t be bound by the settlement amount and other terms it offered Buffett’s company while negotiating the settlement. That suggests it could seek more money from Berkshire than it initially requested.

Berkshire and Volkswagen didn’t immediately respond to requests for comment from Insider.

Volkswagen has faced billions of dollars’ worth of legal claims and fines since it admitted to installing “defeat devices” in millions of its diesel-powered cars between 2009 and 2015. The secret software enabled the cars to cheat vehicle-emission tests and skirt environmental regulations – a scandal dubbed “Dieselgate.”

In addition to its insurers, Volkswagen has reached Dieselgate-related settlements with its former chairman, Martin Winterkorn, and an Audi board member, Rupert Stadler. Winterkorn and Stadler will pay 11.2 million euros and 4.1 million euros respectively, partly by waiving their claims to bonuses.

Volkswagen might be clashing with Buffett, but it counts another famous value investor among its fans: Michael Burry of “The Big Short.” The Scion Asset Management boss disclosed in March that he holds a stake in Porsche SE, the German holding company that owns about 31% of Volkswagen.

“Investors, partly due to the #ESGFog, underestimate the size, scale, brands, staying power, and resources of Volkswagen,” Burry tweeted at the time.

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Fintech startups in Europe raised $17 billion in 2021. See 14 of the pitch decks they used to land millions from VCs.

alexander and oliver kent braham
Marshmallow founders Alexander and Oliver Kent Braham raised $30 million earlier this year.

  • Fintech and insurance startups in Europe have raised $17 billion in a record year for investment.
  • Insider has reported extensively on both sectors as investor appetite soared.
  • These pitch decks reveal how 14 different startups pitched their visions and products to investors.
  • See more stories on Insider’s business page.

Financial services and insurance startups are the crown jewels of European tech right now.

A host of regulatory and market changes have meant that the sector in Europe has grown rapidly in recent years, bringing in higher round sizes, valuations, and bigger investors than ever. 2021 has already been a record year for the industries with a combined $17 billion being poured in by investors already.

Beyond the initial wave of payments disruptors and challenger banks, a set of nuanced solutions to complex consumer and business issues are emerging across the continent.

Both insurance tech and fintech have seen mega deals this year. Swedish buy now, pay later giant Klarna raised from SoftBank at a $45.6 billion valuation, cementing its status as Europe’s most valuable private company. Similarly, Germany’s Wefox hit a $3 billion valuation after raising the continent’s largest ever insurance tech round at $650 million.

Below are 14 pitch decks from fast-growing European tech startups in the fintech and insurance spaces.

Insurance tech

Jean Charles Samuelian Werve   Voyez Vous (Vinciane Lebrun)  0639
Jean Charles Samuelian Werve, Alan CEO, landed $223 million.

Insurance is having a real moment in Europe. In 2021, European insurance tech startups have already raised more than in the entirety of 2020 with $1.9 billion invested over 52 deals, per Pitchbook. Here are six notable raises from the past 12 months:

Fintech

Adriaan Ken 1
Mollie cofounder Adriaan Mol and CCO Ken Serdons raised $106 million this year.

Fintech has been on a growth tear in Europe for a number of years and has shown few signs of slowing down. Everything from anti-money laundering to cloud infrastructure for banking is covered below with a number of unicorn businesses sharing their secrets to investment success.

Like insurance, fintech funding in 2021 has broken past 2020’s total and has already surpassed 2019 – a record year for the sector in Europe – this year, per Dealroom data. Fintech startups drew €8.6 billion ($10.2 billion) last year but have already topped €12.7 billion in 2021.

Read the original article on Business Insider

Biden’s big jobs plan will actually hurt low-income and minority Americans’ chances of owning a home

compromises buying home
The Biden administration’s proposed American Jobs Plan would create new hurdles for minority and low-income first-time homebuyers.

  • The American Jobs Plan would make home ownership less accessible for low-income and minority home buyers.
  • If you can’t put 20% down when you buy a house, you have to pay mortgage insurance.
  • Biden’s plan would make private mortgage insurance more expensive.
  • Jerry Theodorou is the director of the Finance, Insurance and Trade Policy Program at the R Street Institute.
  • This is an opinion column. The thoughts expressed are those of the authors.
  • See more stories on Insider’s business page.

Homeownership is a pillar of the American dream. Last year, the pandemic made many Americans realize they wanted that dream sooner rather than later. Many turned to Redfin and Zillow, swiping through home after home as travel was restricted. News reports quickly followed of surging housing prices and increasing demand as renters turned into buyers and people looked for more living space.

On the surface, this news sounds like a boon to the American economy. Owning a home builds equity and intergenerational wealth, and it can be a cushion against financial setbacks. Yes, there are risks, as shown from the 2008 financial crisis, but American homeownership is still on the rise.

It baffles the mind, then, that as the economy continues to recover, the Biden administration’s proposed American Jobs Plan would create new hurdles for minority and low-income first-time homebuyers. In an effort to pay for the plan, the government would raise the cost of private mortgage insurance, potentially squashing the dreams of millions of Americans.

Inequity in homeownership

Minority and low-income families would be hit hardest by the new legislation because 40% of loans with private mortgage insurance are for families with annual incomes below $75,000, and 60% go to first-time homebuyers. The disparity between homeownership by Black families and white families is already significant – 42.3% of Black families own homes compared with 72.2% of white families. The Biden plan would only widen this gap.

Home buyers can pay as little as 3% of a home purchase price as a down payment. But for those who supply less than 20%, mortgage insurance must be purchased to protect lenders against a borrower defaulting. But private mortgage insurers must have sufficient financial strength to withstand the inevitable peaks and valleys in the cyclical housing market. Since the 2008 financial crisis, new regulations have required insurers to maintain sufficient capital levels to survive another downturn.

Insurers have strengthened their capital base by purchasing reinsurance – insurance for insurance companies. Think of it like a financial shock absorber that spreads risk globally and acts as a bulwark against crippling losses from catastrophic events. Reinsurance is so important for mortgage insurers that in 2020, US insurers shared more than 30% of their mortgage insurance risk with non-US sources. Bermuda reinsurers alone, for example, accounted for just over 50% of such cessions.

The failure of the Jobs Plan

This is where the American Jobs Plan enters the picture. First, it would increase the corporate tax rate from 21% to 28%. Second, it would impose a global minimum tax rate that dilutes the benefits of Bermuda reinsurance. For mortgage insurers, this will inevitably lead to higher prices. Currently, Bermuda reinsurers do not impose taxes on corporate income, allowing mortgage insurers to benefit from the availability of low-cost mortgage insurance.

These actions seem far upstream from the average home buyer, but the effects will trickle down quickly. A higher corporate tax rate for mortgage insurers will eat into their profits. To recoup these lost dollars, they will raise required mortgage insurance rates for all home buyers who put down less than 20%. Simple financial modeling suggests that rates could rise by approximately 10% overall, a significant increase for borrowers, pushing homeownership further away for those of lesser means.

The math is fairly straightforward. Mortgage buyers with excellent credit scores – more than 740 – who put 3% down on a $200,000 home pay approximately $9,500 for the mortgage insurance over eight and half years until the loan-to-value ratio drops below 80%. Borrowers with credit scores between 680 and 699, slightly below the national average, with the same down payment on the same home pay approximately $19,800 in mortgage insurance. Under Biden’s plan, those costs could increase by as much as 10%.

If the American Jobs Plan becomes law, the cost of insurance will rise, potential homebuyers will be affected directly, and, thus, the economy overall.

The Biden administration should stop building barriers to homeownership and instead support policies that will help first-time homebuyers, particularly the low-and-moderate- income families, especially in today’s low interest rate environment. One way to begin is to reconsider the proposed anti-free trade, anti-fair trade, globally-mandated minimum tax policies. The American dream depends on it.

Read the original article on Business Insider

Europe’s hottest fintech startups raised $17 billion in 2021. See 14 of the pitch decks they used to land millions from VCs

alexander and oliver kent braham
Marshmallow founders Alexander and Oliver Kent Braham raised $30 million earlier this year.

  • Fintech and insurance startups in Europe have raised $17 billion in a record year for investment.
  • Insider has reported extensively on both sectors as investor appetite soared.
  • These pitch decks reveal how 14 different startups pitched their visions and products to investors.
  • See more stories on Insider’s business page.

Financial services and insurance startups are the crown jewels of European tech right now.

A host of regulatory and market changes have meant that the sector in Europe has grown rapidly in recent years, bringing in higher round sizes, valuations, and bigger investors than ever. 2021 has already been a record year for the industries with a combined $17 billion being poured in by investors already.

Beyond the initial wave of payments disruptors and challenger banks, a set of nuanced solutions to complex consumer and business issues are emerging across the continent.

Both insurance tech and fintech have seen mega deals this year. Swedish buy now, pay later giant Klarna raised from SoftBank at a $45.6 billion valuation, cementing its status as Europe’s most valuable private company. Similarly, Germany’s Wefox hit a $3 billion valuation after raising the continent’s largest ever insurance tech round at $650 million.

Below are 14 pitch decks from fast-growing European tech startups in the fintech and insurance spaces.

Insurance tech

Jean Charles Samuelian Werve   Voyez Vous (Vinciane Lebrun)  0639
Jean Charles Samuelian Werve, Alan CEO, landed $223 million.

Insurance is having a real moment in Europe. In 2021, European insurance tech startups have already raised more than in the entirety of 2020 with $1.9 billion invested over 52 deals, per Pitchbook. Here are six notable raises from the past 12 months:

Fintech

Adriaan Ken 1
Mollie cofounder Adriaan Mol and CCO Ken Serdons raised $106 million this year.

Fintech has been on a growth tear in Europe for a number of years and has shown few signs of slowing down. Everything from anti-money laundering to cloud infrastructure for banking is covered below with a number of unicorn businesses sharing their secrets to investment success.

Like insurance, fintech funding in 2021 has broken past 2020’s total and has already surpassed 2019 – a record year for the sector in Europe – this year, per Dealroom data. Fintech startups drew €8.6 billion ($10.2 billion) last year but have already topped €12.7 billion in 2021.

Read the original article on Business Insider

One of the biggest US insurance companies reportedly paid hackers $40 million ransom after a cyberattack

GettyImages 522019766
Investors are pouring billions into cybersecurity startups.

CNA Financial, one of the largest insurance companies in the US, reportedly paid hackers $40 million after a ransomware attack blocked access to the company’s network and stole its data, according to a report from Bloomberg’s Kartikay Mehrotra and William Turton.

CNA first announced the hack in late March, stating that it had seen a “sophisticated cybersecurity attack” on March 21 that had “impacted certain CNA systems.” To address the incident, the company called in outside experts and law enforcement, both of which launched an investigation into the attack.

But behind closed doors, about a week following the ransomware attack, CNA began negotiating with the hackers, Bloomberg reported.

The hackers initially demanded $60 million in ransom. But following negotiations, CNA paid them $40 million in late March, which could be one of the largest ransomware hacker payments yet.

Bloomberg’s report on CNA Financial’s ransom payment comes just weeks after Colonial Pipeline – the US’ biggest refined products pipeline – paid hackers $4.4 million following its own cyberattack, which had caused gas shortages across the East Coast.

Colonial Pipeline’s payout may be notably lower than CNA Financial’s, but the cost of ransomware attacks have been increasing. In 2020, the average ransomware payment increased 171% from $115,123 in 2019 to $312,493 in 2020, according to a report from cybersecurity firm Palo Alto Networks. And earlier this year, both Quanta, an Apple supplier, and Acer were targeted by ransomware group REvil, which demanded $50 million from both companies.

However, the FBI advises against paying a ransom, and says doing so could instead encourage more hacks.

According to a May 12 update from CNA, “systems of record, claims systems, or underwriting systems where the majority of policyholder data is stored” were not affected by the cyberattack.

A CNA spokesperson told Insider that the company isn’t commenting on the ransom, but that it had “followed all laws, regulations, and published guidance, including OFAC’s 2020 ransomware guidance, in its handling of this matter.”

The spokesperson also noted that a group called “Phoenix” was behind the attack. The ransomware used on CNA is known as Phoenix Locker, a spin-off of another malware “Hades” created by Russian hacking organization Evil Corp, Bloomberg reported.

The US Treasury Department last sanctioned Evil Corp in 2019 following the group’s distribution of another malware. This sanction barred Americans from paying an Evil Corp ransom. However, the CNA spokesperson noted that Phoenix “isn’t on any prohibited party list and is not a sanctioned entity.”

Read the original article on Business Insider

A Lyft driver was hospitalized after being hit by a drunk driver going 85 mph, now he’s battling Lyft over its pandemic-era insurance cutbacks.

Lyft
  • Lyft driver Drew Wajnert is unable to walk after being hit by a drunk driver while on the job.
  • But Lyft dropped an insurance policy during the pandemic that may have covered his medical bills.
  • One expert told Insider Lyft’s insurance, even with that policy when it was in effect, falls far short of what traditional employers must provide.
  • See more stories on Insider’s business page.

Shortly before 9 p.m. on March 2, in Lakewood, Colorado, Drew Wajnert was rear-ended by a drunk driver who was going 85 mph, sending his car slamming into the median and fracturing his spine.

“When he came up to me and asked me how I was,” Wajnert told Insider, “What he may have not seen was, not only did he rear-end me at 85 miles an hour, but I spun into the concrete divider at 50 miles an hour, and then spun to the shoulder to a dead stop.”

Emergency services arrived on the scene within minutes, taking Wajnert to nearby St. Anthony’s Hospital, where doctors performed surgery to install a titanium plate and four screws in his neck. Months after the accident, Wajnert – now in a special spinal-cord injury rehab center at Craig Hospital – still has braces on his neck as well as both hands and knees, and while he has regained some feeling, there is no guarantee he’ll ever walk again.

As a full-time Lyft driver, Wajnert spent much of his time helping keep drunk drivers off the road. Now he’s trying to prepare for the many physical and financial challenges ahead.

“I’m fighting as best as I can, but I am hospitalized and Lyft really isn’t doing anything for me,” he said.

“We are deeply saddened by this accident and our thoughts are with Drew and his loved ones during this difficult time. We’ve reached out to Drew and a member of his family to offer our support and stand ready to assist law enforcement in any way we can,” a Lyft spokesperson told Insider. (Wajnert’s attorney, Kurt Zaner, said Lyft reached out after Wajnert began contacting media outlets to share his story).

Zaner said Lyft dropped a driver insurance policy when the pandemic hit that he believes may have covered Wajnert’s medical bills. Those bills could amount to hundreds of thousands of dollars.

Wajnert is planning to sue the driver, Alexander Marakas, who has been charged with vehicular assault, and possibly any bars that served Marakas, which could also be found liable for damages under Colorado’s “dram shop” laws. Marakas, through his attorney, declined to comment.

Lyft told Insider that, in Colorado last year, it didn’t make any changes to the insurance policies that cover drivers when they’re waiting for Lyft’s algorithm to find them a passenger (the phase Wajnert said he was in at the time of the accident).

But regardless of whether that specific pre-pandemic policy would have covered Wajnert’s accident, his situation reveals the glaring gaps in driver protections that are a direct result of Lyft classifying drivers as independent contractors. That strategy allows companies like Lyft and Uber to provide minimal worker protections, and helps them avoid legal and financial liability when drivers like Wajnert get hurt on the job.

Drew Wajnert, a Lyft driver in Denver, Colorado, was left unable to walk after being hit by a drunk driver going 85 mph.
Drew Wajnert, a Lyft driver in Denver, Colorado, was left unable to walk after being hit by a drunk driver going 85 mph.

A patchwork of policies

For Wajnert, who drove taxi cabs for 10 years in New Jersey, Lyft wasn’t a casual, part-time side hustle. Lyft has been his only source of income since signing up in January 2020, and he typically drove between 40 and 70 hours per week throughout the entire pandemic, completing 4,135 rides last year.

Wajnert leased his car, a 2019 Hyundai Santa Fe, through Lyft’s Express Drive program, costing him roughly $240 per week. Lyft charged Wajnert $500 after his accident, the deductible for the insurance policy on the vehicle. (The company told Insider it has since refunded that charge as well as the deposit Wajnert initially paid to rent the vehicle).

When it comes to drivers, transportation companies carry a variety of insurance policies, and Wajnert said he was under the impression Lyft’s insurance policy would be sufficient in the event of an accident, so he didn’t take out his own policy on top of that. In reality, Lyft has a complicated three-tiered policy that only kicks in when drivers turn on their app, and only provides limited coverage if its algorithm hasn’t yet found them a passenger.

Many companies also carry what are called uninsured/underinsured motorist bodily injury policies (UM/UIM). These policies help pay for an injured driver’s medical bills and other expenses in the event that the driver who hit them doesn’t have enough insurance to cover those costs.

Before the pandemic, Lyft had UM/UIM policies that covered drivers. But on March 31, 2020, Lyft dropped those policies in Colorado and nearly every state where they weren’t required by law, according to documents seen by Insider, leaving drivers in a majority of states with no such coverage.

Wajnert said Lyft never told him about that change, however, or at least not in a clear way, and that he “absolutely” would have bought additional coverage on his own if he had known.

“There was no grand email or reachout, no phone call from the [Lyft] Hub or anything like that,” he said. “I can’t understand why Lyft would carry insurance for people that we injure, but not insurance for its drivers when a reckless drunk driver hurts us.”

Lyft’s website still advertises that it provides UM/UIM coverage for drivers, in certain cases, with a small footnote indicating “coverage, where provided, may be modified to the extent allowed by law.”

Wajnert said he only found out about Lyft’s lack of coverage through his attorney, Zaner, after the accident.

“If this happened a year and a half ago, Drew would be able to make a claim with Lyft’s underinsured policy, most likely,” Zaner said. “Lyft carried $500,000 to $1,000,000 of underinsured coverage. It was a nice benefit that was pretty much expected in that industry; taxi cabs have the same kind of coverage, and they still do.”

Lyft said it carries third-party liability insurance in Colorado, a requirement of laws governing rideshare companies, as well as Medical Payments insurance, which it says results in faster payouts.

But the fact that Wajnert may still be left to foot the bill despite working for Lyft when he was hurt is ultimately a consequence of the company’s core business model.

The precarity of independence

As Uber and Lyft face growing calls from regulators and driver advocacy groups to pass laws reclassifying drivers as employees, the companies frequently defend their current business model by pointing to surveys saying the majority of drivers want to keep the flexibility they enjoy as independent contractors.

Setting aside repeated court rulings questioning just how independent drivers are, Wajnert’s case illustrates how that independence can also leave drivers on their own in a way that could be devastating.

When employees are hurt on the job, they’re entitled to workers’ compensation, funded partly by their employer, which pays them for wages they missed out on because of their injury, and covers all of their medical bills. They can also qualify for occupational therapy to help them get back to work or, in cases like Wajnert’s, permanent disability if their injury prevents them from working.

“Workers’ compensation laws were written with automobile workers in mind,” Veena Dubal, a law professor at the University of California, San Francisco Hastings School of Law, who focuses on the intersection of technology and dangerous jobs, told Insider.

These laws emerged in the 1930s directly as a result of “widespread industrial injury and fatality, but particularly on railroads and as a result of automobiles,” she said, adding that they were written “precisely” to protect people like Wajnert who work in especially dangerous industries.

“It’s so incredibly tragic that he, and many, many, many hundreds of workers in this country … are in this situation where they essentially will no longer be able to work or support themselves as a result of how the companies choose to classify them,” Dubal said.

Companies face substantially more legal and financial liability for work-related accidents involving their employees than they do for contractors. For example, Amazon has relied on this model to minimize liability when its delivery drivers are injured (or injure others).

As a result, companies like Lyft and Uber have the legal flexibility and financial incentive to carry less extensive insurance.

If Lyft drivers were employees, according to Dubal, the company would likely have commercial insurance covering “all the time” drivers spend working, not just when they have riders in the car, which she said may be only 40-60% of the time drivers are on the road. Instead, Dubal said, what Lyft offers currently is “minuscule” compared what’s required of companies subject to commercial insurance laws.

And for drivers like Wajnert who come from jobs where their employers have more robust policies, the gaps in Lyft’s coverage can come as a surprise – and something they don’t realize until its too late.

“It’s horrible. I want to get the word out to Lyft drivers who are currently driving to be aware that they’re not covered [by UM/UIM policies],” Wajnert said, adding: “I basically was a full-time employee for them.”

Lyft does not classify its drivers as employees.

Wajnert is hospital-bound for at least another month, joined by his sister, Melissa, who had to move from North Carolina to stay with him due to Craig Hospital’s requirement that rehab patients have a caregiver with them.

While he’s trying to stay positive and his friends have started a GoFundMe campaign to help him make ends meet, Wajnert said it’s going to be a long road to recovery.

Read the original article on Business Insider

The Ever Given crisis put mega ships under the spotlight. As vessels get bigger and more automated, a long-serving captain and other experts are weighing up the risks.

Ever Given Stuck in the Sand in the Suez Canal
The Ever Given cargo ship stuck in the Suez Canal.

  • After the Ever Given blocked the Suez Canal, industry insiders are taking note of other risks.
  • Bigger ships, more automation, and smaller crews are concerns, said Capt. Rahul Khanna, of Allianz.
  • Climate change has made a shipping route through inhospitable Arctic waters more popular.
  • See more stories on Insider’s business page.

Shipping vessels have grown larger by multiples in just a few years, adding to worries among some industry insiders that a single mistake made by a massive ship could cause a global supply chain disruption, as the world saw with the Ever Given.

That ship, which was stuck in the Suez Canal for about a week in March, slowed or stalled shipping traffic around the world. It was estimated to cost the global economy about $400 million per hour, and its effects have still been rippling through the economy in recent weeks.

As ships like the Ever Given have grown over the last few decades, their crews have been shrinking because they’re using more automated processes, said Captain Rahul Khanna, global head of marine risk consulting at Allianz Global Corporate & Specialty, whose team publishes an annual safety review.

“Decades ago, the ships with 3,000 TEU – that’s the number of twenty-foot containers that can fit onboard – were considered the big ones,” said Khanna.

Now, ships like the Ever Given carry maximum loads of more than 20,000 containers. Boat-building technology could in the years and decades ahead produce ever-larger ships, perhaps growing to 50,000 containers or more. If there’s demand for such ships, modern technology could allow for such builds, Khanna said.

Between 2006 and 2020, the largest shipping vessels in the world grew by 155%, according to a January report from the United Nations Conference on Trade and Development. The biggest ships are loading or unloading 125% more at each port they visit.

With bigger boats, there could be more impactful accidents.

“While seemingly efficient, they are too large to fit in some ports, increase dangers in storms, and highly piled containers are falling, causing product and the corresponding financial losses,” said Cheryl Druehl, associate professor of operations management at George Mason University.

Even the Ever Given debacle, which grabbed hold of the worldwide news cycle, could have been worse. If that ship’s hull had broken, say, it would have taken even longer to fix the issue, Khanna said. It’s likely that a crane would have had to have been constructed nearby to remove some or all of its load. Refloating it would have been a more complex task, likely stretching into months.

Surveying the world’s riskiest shipping routes

Container Ship in the Arctic
A cargo ship in the North Pacific Ocean.

As the shipping industry gets back to its normal routine, Khanna and other shipping industry insiders walked Insider through their concerns about the next big disaster.

The most obvious answer was that another ship could get stuck in the Suez or Panama canals. The risk of a situation similar to the Ever Given’s crash in one of those waterways was “unlikely but high impact,” said Ambrose Conroy, founder and CEO of Seraph, a consulting and turnaround firm.

The risk was lower at other heavily travelled shipping lanes, including the Singapore Strait, and the Strait of Hormuz, although it has geopolitical risks of its own, said Khanna.

Ports in the future may also have trouble handling larger ships, but that’s an issue that can be fixed with proper planning, Conroy said. Instead, it’s the “black swan events” like the Ever Given that the industry needs to look out for.

One concern is a shipping route that’s becoming more popular. In decades past, a lane through the Arctic would open in summer months, giving ships a more direct path between Europe and Russia.

As the climate crisis has reduced the amount of ice in those northern regions, that passageway is now increasingly being used in the winter. It’s become so popular that the International Maritime Organization issued a revised Polar Code.

As the Ever Given stalled global shipping in March, Moscow officials pointed to the Northern Sea Route through the Arctic as an alternative.

But Arctic travel comes with its own risks. While it’s unlikely that modern ships, with all their technology, would hit an iceberg, smaller ice floats can still damage hulls, Khanna said. An oil spill in the Arctic would also be devastating to marine life. And rescue crews might have difficulty reaching a stranded ship in such inhospitable waters.

Concerns about long journeys during the pandemic

A Ship in the North Pacific Ocean.
Crew aboard a Finnish icebreaker.

Shipping industry observers also say the health and wellbeing of ship crews are a growing concern for 2021 and beyond. Shipping can take crews around the world – “It’s easier to list the places I haven’t been,” said Khanna – but many haven’t been able to visit their homes since the pandemic began.

“Crews haven’t been able to go back home on their leave,” he said.

Automation hasn’t helped, said Druehl, the George Mason professor. With more automation, ships have been able to stay away from their home ports longer. And it’s brought up issues like “skeleton crews, leading to more isolation and risk of piracy.”

Decentralizing the manufacturing industry is one possible way to cut risk, said a few industry insiders. Bring manufacturing back in the parts of the world that have become importers, and shipping won’t be as much of a concern, they said. But that’s easier said than done.

“The intricacies of global logistics are meaningless to most, that is until the truck doesn’t show up and the shelves go empty,” said Richard Weissman, director of the Organizational Management Program at Endicott College.

Issues caused by the Ever Given were still trickling through the supply chain in the last few weeks, he said. But most people won’t notice, unless they’re among the few who actively follow supply chains.

He added: “Once freight crosses the threshold of the loading dock and the truck door closes, we tend to forget about it. That’s the one thing that has to change now.”

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5 Benefits Of Having An Extended Car Warranty

Most car manufacturer warranties only remain valid for a few years right after buying the vehicle. And because it doesn’t last a lifetime, you’ll have to pay out of your pocket to correct any issue arising after its expiry, that’s why having an extended car warranty is deemed necessary. Advantages Of Extended Car Warranty  Having an extended car warranty is an optional plan you may choose to help offset the total costs of labor and repairs when your vehicle needs one. However, many people view extended car warranties to be a waste of money. If you share the same sentiment,

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Scammers stole the driver’s license numbers of some Geico customers in a data breach, and they could be used to file for fraudulent unemployment benefits

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If you’re a Geico customer, check your mail and inbox.

Some Geico customers were notified in April that their personal information – specifically their drivers license number – had been compromised in a data breach caused by a security bug on the insurer’s website, TechCrunch’s Zack Whittaker first reported.

Geico directly notified some customers on April 9 that “fraudsters used information about you – which they acquired elsewhere – to obtain unauthorized access to your driver’s license number through the online sales system on [Geico’s] website.”

The breach, Geico said, occurred between January 21 and March 1 of this year. Geico said it has since secured its website from the vulnerability.

The insurer warned that fraudsters would likely use the license numbers to fraudulently apply for unemployment benefits, which often require a state ID.

A Geico spokesperson did not immediately respond to a request for comment on the number of customers affected and whether the data had been tied to confirmed cases of unemployment fraud.

In the notice sent to customers who were affected, Geico urged vigilance and offered a one-year subscription to IdentifyForce, an “identity-theft protection service.” Geico said in the notice that it did not know for certain whether the customer’s drivers license number had been fraudulently used, but that it was a possibility.

Unemployment fraud has spiked as unemployment claims increased during the pandemic, an AP report in February found. By November of last year, the US Department of Labor’s Office of Inspector General estimated that states paid out up to $36 billion in “improper benefits,” with much of the impropriety attributed to fraud, according to the report.

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