Expeditors International of Washington, Inc. (EXPD) Earnings Call Transcript & Summary

We're going to get started here in just a minute. We're going to let people get logged on. So feel free to grab your coffee while we wait. But we really appreciate you joining us today for our risk and insurance webinar. All right. Looks like we're just about ready to start. Okay. Well, I'll start off by introducing myself. My name is Ben Vahdat, and I'm with Expeditors Northwest Regional Marketing and Sales team here in the Pacific Northwest. I work out of our Portland, Oregon office. And I have a lot of fun working with all the great people we have across the West Coast. Looks like -- I think we're good to go. Rob, if you want to go to the next slide here. So thanks again for joining us this morning. I'll just kind of cover a few ground rules for the webinar. Today's webinar should last approximately 50 minutes with a 10-minute Q&A at the very end. Today's webinar will be recorded and following the webinar, we're going to send out a brief survey that will include a few questions, just asking how we did. We really appreciate your feedback. Helps us know how we did and also helps us for future webinar events that we hold. So if you could please support that survey, that would be great. Upon completion of that survey, you will receive both a copy of today's presentation as well as the webinar recording. But yes, as far as questions go, we're going to save most of those for the end. So submit any questions that you have during the webinar in the Q&A box, which is located at the bottom there, and we'll do our best to get to as many questions as we possibly can. If for some reason, we can't get to your question, we'll definitely make sure to follow up with you after the webinar. So with that being said, I'm happy to introduce today's speaker, Rob Flores. He is our West Coast risk management and insurance manager for us. And Rob, I'm going to go ahead and hand it over to you.

Great. Thank you very much, Ben. I appreciate it. Good morning. As Ben mentioned, good morning, good afternoon, wherever you may be sitting. So the idea of this presentation is just a very high level risk management webinar for you guys to be a little more informed about risk management and how it could impact your business. As Ben mentioned, we're shooting for about 50 minutes. I tend to ramble on sometimes. So I'll try to keep it buttoned up as the best I can. But there's a lot to cover over this next hour. So I do thank you again for joining. As mentioned, we will be having a Q&A session at the end of this. And if we can't get to your question, we'll be sure to answer those via e-mail. So without further ado, we'll jump into the agenda, go over an introduction of who I am, what my role is in regards to the insurance within Expeditors. Can I give you a little history lesson on cargo insurance? Kind of the origins per se of cargo insurance and then who is Expeditors Cargo Insurance Brokers right? Who was ECIB? You may have heard that term with some of our folks in your region. I'll give you a little breakdown of what that refers to. And then kind of go over some current market conditions, share with you kind of where risk could lie within your supply chain. I think you -- maybe some of you may know where everything -- risk may happen, but some may not know. So kind of a very high level, looking at your risk in your supply chain. And then how does carrier liability versus cargo insurance apply to you? And then we have some resources at the end. So a little bit about me. So 1999, that's when I started with Expeditors. So I am coming up my 25th year on March 29. I'll be 25 years with the company. When I started with Expeditors, we were a lot smaller then. We had about 6,400 employees and about half the locations we have today. And I started in the DFW, Dallas Fort Worth branch in March 29, 1999. I remember that date because my birthday is March 28. So for those of you who's taking notes, feel free to send me a gift. But Dallas only had like 30-something employees at the time. Now it's upwards of 200 to 300, I believe. So I started in Dallas Fort Worth office, and then 3 is what -- how many offices I've worked in. So I did start in Dallas Fort Worth. From there, I moved to El Paso and then from El Paso into Houston. And within those 3, I've had 10 different positions. I started in air export, some more would be outbound, air cargo going international. And then when I moved to El Paso, I was doing air and ocean as well as trucking. I then moved to Houston. I was doing ocean and then some of the -- managing our day-to-day trucking providers and warehouses. For the last 7 years of my career here at Expeditors, before joining the insurance team, I joined in July of 2022. And then -- so a little bit about me, 18 years I've been married, I need to make that 19. Coming up, my marriage anniversary is March 5. So 18 years married, I got 2 beautiful daughters. Brooklyn and Aspen. They call them the little cities. They're 16 and 14, hence, why I have no hair left. And then that's a picture of my family. I refer to picture Big Tex in the background, if you don't know who he is. There's a state fair held every year in Texas, but I'll explain why he is important in this presentation a little bit later. And I have 2 dogs and a cat. So you got to have some furbabies with you. So as I mentioned, I sit in Houston, but I cover the Western region. So I cover every office, every city and every office that we have in the West. And then some customers may not be near one of our offices, and that's more of the shaded areas. But we do have customers that have cargo insurance in those parts of the United States. So shaded red is where we have customers, red is where we have offices, and I cover both of those. And then just a fun fact about me, one of my favorite movies, if you don't know what the movie is called, it's called Office Space. It debuted in February of 1999. This is what I had to look forward to when I joined Expeditors in March of 1999. But if you have not watched it, if you need a little laugh, a little chuckle, especially if you work in an office environment, those that you've probably seen this, you'd probably go, yep, that's very true. So -- so pretty famous characters in there that made some pretty big names for themselves over the years, but something if you're looking for a movie to watch this weekend, it's probably one that I would kick out to you guys. So a little bit -- that's little bit about me, moving on to insurance. So talk about the evolution risk management, right? And where does it start? How long ago did it start? Well, it goes back many, many years, right, centuries ago. We look back and it was kind of back 900 BC, right? And there was these traveling salespeople called [indiscernible] basically that would travel and they would have a loss of goods or product and their bosses was like, hey, man, and so they kind of came up with a plan and they created what they call the Code of Hammurabi to kind of build a plan for say, for a loss of goods and how that's going to be repaid to the purchaser. It's very loose and then they start figuring out how do we do general average, right? And we didn't call it general average back then, but it's like where did this all start and the kind of sort of building a plan of how do you make cargo insurance, something that's there because back in the day, there was merchants that were sailing the seas and then we start figuring out how to build policies. And that's kind of where you move forward to like 1360-ish AD in Bruges Belgium is where cargo insurance kind of got a start right? There was like the talks about it back in the early days, the traveling salespeople having collateral for their property and their families. And then you kind of fast forward to having kind of the first insurance policy that was built in the early 13 -- I think it's 1362, if I'm correct. And you kind of fast forward more to kind of this century and are more what we kind of know like the days we know it's like 1686 to be exact. There's a guy by the name of Edward Lloyd. He ran a coffee shop in London. He would sell marine cargo insurance to merchants that were coming in. And now as known is what we can know as Lloyd's of London. But that started way back in the day, and this is where the fruition of more of the policies kind of came into play. And those of you that are cargo policy holders, whether it's general liability, a cargo specifically, property, whatever it may be, if you read some of the lingo when it pertains to cargo, some of the wording seems very ancient. They haven't changed a lot of it over the years. If you look at it like Shakespeare wrote it. So it's a lot of the same dialogue that they were using then -- there's been some of the same wording and things that we use for exclusions and what have you. So -- and then you kind of fast forward to the 1950s, right? It seemed like it wasn't that long ago, but it really was that long ago. A gentleman by the name of Malcolm McLean, he created the shipping container, right, that we know today, right? And that was like evolutionary in getting cargo into one space on a vessel. It was lowering their freight rates. It was reducing their damages. But as you all know, those things are just getting more and more packed to the brim, making them heavier they're putting more on the ships, and we'll talk a little bit about concentration of value. So there's still a good thing, but there's still risk in utilizing the shipping containers because even back then, when these were rolled out, the idea was we put all the stuff in these containers, well, then they would forget to record what they put in the container. So it would arrive and they're like I don't know what I put in there. Nowadays, everybody has got more of some types of technology to kind of track what's going in or coming out of the container. But back then, that wasn't around, right? And then you kind of move to what we call the Internet of Things, right, real-time tracking, tracing a cargo, we utilize cargo signal. There's a lot of things that we use today to manage product, manage the lifespan of product on the water, diversions, whatever, we can kind of really see what's going on with our cargo in real time. And so you look back at the span of cargo insurance and where it started and the early days to where it is now, and it's ever evolving, and things are always changing. But I think for right now, it's kind of -- it's moving in the right direction. We've got a lot more tools and resources at our disposal that helps us manage cargo to minimize risk for the customers where we see fit. So it's kind of the evolution of risk management in a nutshell. There's a lot of pieces I left out of there, but that's kind of where the origin of it is to where we're at today. And then I mentioned Expeditors, we're a global company. We have a lot of subsidiaries, one being Tradewin, which you all may work with, but the other one I mentioned earlier is ECIB, which is Expeditors Cargo Insurance Brokers. And that is our operating broker arm for our cargo insurance segment. So normally, when we're selling our working policies, where we're able to put it in what we call the box or our own internal policy. And sometimes those don't always fit inside. So we use our broker arm to go out and shop the market on your behalf to find a way to ensure your goods at a reasonable rate. And so we'll go out to the market. and we're going out and trying to find the best rate that fits whatever we're trying to insure. So we are a broker, it's based in Seattle, but we do have 2 other agencies set up in Europe and Mexico. We are a TPA claims management as well, so we can manage your third-party claims and then work with your teams to help with that. And so the team works with Expeditors. They're still Expeditors employee but they have more of the operating arm to go out to broker should we need to do that. So if you may have heard of Marsh or an Aon, they're very large insurance brokers. We are also an insurance broker, but we specialize in cargo insurance because that's what we do. I wouldn't try to go sell your property insurance because I don't know anything about property. I know cargo, and that's what we specialize in as cargo insurance, brokering. So let's move forward and to kind of talk about insurance. And this ship, you all may have remembered it about 10 years ago, it was the MOL Comfort. It's about 200 miles off the coast of Yemen. It cracked in half, and half of it sank, the other half stayed afloat for a few weeks and then it caught on fire. And there was total loss. It was about $300 million to $400 million of loss. The crazy thing about this, this happened in June of 2013, and the ship itself was only 5 years old. It's a very young ship in its fleet. It's an 8,000 TEU vessel. So if you think about 8,000, I remember 8,000 TEUs not a big ship, right? When you look at what we're dealing with today. And it wasn't that long ago. And it was very young ship. It's just -- there was a crack in the hole. I've got some really neat pictures. You can just Google MOL Comfort and you can see all the pictures of it kind of floating and then the containers at sea and then when they caught on fire and then they're trying to put it out and ended up sinking the entire ship. So the total loss. So what I want to ask you is 5 questions. So how many claims do you have globally, right, and which products are damaged the most and why? Which carriers are causing the most damage? What impacts to your claims having your customers or your production and how much your cargo claims costing you per year? These are 5 very important questions, and we're looking at the cargo insurance space. If you can answer these, and you probably have a good handle on your cargo insurance and there's really not a need to dive in deeper. But if you cannot, these would be a good starting point for you to realize, do we need cargo insurance or are we insured properly for what we're moving. And then when we do have a claim, how long does that process take, right? And that's kind of the idea that you want to think about in your companies is like how do we maximize our dollar, right, and make sure that we're protecting our customers and ourselves. So just think about those, there's 5 questions to ask yourself or ask your risk managers, you're not -- you don't want to risk on your organization. I know some organizations the risk team falls under the finance folks. So ask them, hey, do we know what carriers are having the most damage for us, right? And what are we doing about it? These are things you just think about. So let's talk about the current market. So rates have been going up in insurance space since 2018. The claims are going up, the frequency of the claims, the magnitude of the claims. Deductibles are increasing. That's the way that these insurance agencies can kind of recoup some of the losses or payouts. And what we're seeing, and as I mentioned earlier, is risk management responsibilities are moving into logistics side of a lot of organizations. And if I was a logistics person back in the day, if we're handling insurance claims, I would know where to again. So we're seeing this, right? And I think that's kind of what I -- my job is to help our customers in the West Coast ask how do we help you, right? And how do you build an insurance program if you don't even have one. So think about when your logistics, your job is getting freight in or out the door all day long. But then you got to add insurance to it, right? So it's another piece of the pie that you got to figure out. And am I insured correctly? Are my limits accurate right? Am I -- do I normally move $50,000 per vessel or do I move $100,000 or maybe it's more than that. So looking at how much is getting on a vessel or an airplane or a truck and are you covered if just something happened to that, right? So things to think about. So what we're seeing kind of moving into today, like 2023 into 2024, the loss ratios are starting to subside. I think if you know, COVID kind of -- was kind of crazy for a lot of individuals, a lot of companies. Volumes were spiking to kind of replenish. So people were rushing, and that's where we're seeing a lot more claims and issues. I think we're kind of coming down off of that and the loss ratios are kind of normalizing, if you want to call it that. The rates are starting to stabilize. They're staying kind of steady. We're not seeing any huge spikes. There's a slight increase, but -- for the most part, we're keeping it at bay as much as we can. A lot of companies are just focusing on cost control, right? As I mentioned, moving the risk management departments into logistics to try to consolidate leadership or individuals. A lot of companies want to try to save money, and they were doing the best dollar for whatever they're shipping when it comes to cargo insurance. And it's an added cost. It's that thing that protects you. If you're like me, go buy something at Best Buy or somewhere. They always try to sell you an additional coverage. It's kind of the same thing for cargo, right? It's that peace of mind at a very low cost. And then what we're seeing as companies are starting to shift their teams, they're also thinking about what do we do with our claims, right? When you talk about claims, some of the customers that have lots of claims, right? You deal a lot with small pack or lot of domestic trucking. Things are always happening, especially if you use like an LTL network. I've been to these LTL warehouses and man throw freight like it's like a football game. So it's crazy. So thinking about how do we manage our claims, right? So I think a lot of organizations are trying to figure out how do we manage our claims? And do -- is there a company that you can hire, right? They're called TPAs, Expeditors CIB is one of those. But how to manage the claims, get back your subrogation to kind of put back in your pocket and how to take that workload off of your individuals. That's one thing that a lot of companies are starting to do is like figure out how do I manage that? So just kind of high level on current market conditions. So I wanted to -- I need to do these seminars in person, but I always ask, how many people move freight between Asia and the United States or Latin America, United States or vice versa, air, ocean doesn't really matter. And then how many times do you think that cargo gets touched whenever it's traveling from point A to point B, right? The average answer is 5? Most people think that their cargoes touch 5x through the life cycle of a supply chain. In some cases, that's very true. And in a lot of cases, it's not, right? You got to think about leaving your factory, the truck are picking it up, maybe it will go to a consolidator, maybe it will go to a CFS, maybe it will go to another warehouse. And then say comes to Expeditors then we touch it and then it goes to the airline. They touch it. And then it gets on the plane. And then you kind of reverse all of that to the delivery point. On average yes, 5 to 7, but we're seeing more like 10 to 12, to be honest with you, touches. And in terms of customs hold, right, then they got customs going to be touching your cargo. So that can happen anywhere in the supply chain. So we call it risk is basically everywhere. Risk can happen whenever you're not expecting it happening because I think a lot of folks, they give their freight to say Expeditors or to any other organization, and they're done with it, right? But what happens after that? And how many times do they touch other warehouses or other forklift operators or other trucks to get to the final destination, right? Because you're paying one company to help you move your cargo from point A to point B, but these other companies along the way that are helping move that cargo. And a lot of those folks, it's just a box to them, right? It's just a piece of freight. They don't care what's in it. They don't care what it is, where it's going, they're smoothing it across their floor, fork holes, left out on the tarmac, you name it, things happen. So just think about your process when you look at are you insured and then where are my touch points for my cargo? So as I mentioned earlier, I have a little quiz. I have Big Tex, just the guy in the middle, using my picture, my intro. Just generally, I ask which one of these you think is the shortest of the tallest. The first one, especially you guys on the Pacific Northwest, probably not the Seattle Space Needle, Evergreen Ever Ace, Big Tex, that's JPMorgan Chase towers #4, it's in Houston and the Eiffel Tower. And I have to say that it's the Eiffel Tower in France, not the one in Las Vegas and not the one in Paris, Texas because there is one in Paris, Texas with a cowboy hat on it. So who thinks -- I don't know if there's a poll, I forgot to do a poll on this one. But the shortest is going to be Big Tex, right? He's the shortest guy on there. He's 55 feet, and it kind of goes up from there, right? The reason I'm showing you this is because all of these as they get -- they're bigger and bigger and bigger. When you look at the Eiffel Tower, it's very tall, right? You look at the JPMorgan Chase tower, if you were in Houston, it's pretty tall. The ship is bigger than that, right? So it's like, wow, it's a big ship, 1,300 feet. That's a very long ship. That means it can hold a lot of freight, which means there's a lot of risk, and I'll talk about that in a minute. So we'll talk about Big Tex for a second. Big Tex caught on fire about a decade ago. He debuted as Santa Claus in the State Fair of Texas, which is every fall. It runs for about a month. And then he came as Big Tex in 1952. In October 2012, he caught on fire, it was like the last weekend of the State Fair. When they went to kind of figure out how do we get our insurance money to pay for Big Tex, they found that he was only insured for their limit of $155,000, which sounds like a lot, but that was not including today's dollar. His valuation had increased over time, cost of materials, et cetera, had increased as well. And the city of Dallas didn't increase the limits for Mr. Big Tex because whenever they went to get the cost to rebuild him, it was $600,000. So the City of Dallas is like, oh my gosh, what are we going to do? We got to build Big Tex. He's part of staple of the State Fair of Texas. So what they did, they reached out to the public, got donations from the public. They did a formal funeral for Big Tex and they rebuilt him and then next year, he was rebuilt. He got a face mask for COVID. He's got fire retardant clothing and he's got extinguishers. So now they have adjusted the limits to today's dollar. And I bring that up because I talk to a lot of customers and ask them, "Hey, what is your limit? Oh, it's like $25,000 like, cool, how much do you normally move? Like $75,000 per vessel. Okay? So if something happened, you're only getting the $25,000. You're not getting the $75,000. So I just bring that to light because risk is everywhere, but your limits can apply not only to cargo, but to real-life situations. So think about your house, your vehicle, anything else you insure, get your brain going because I think these things can happen. And then I shared with you the Evergreen Ever Ace. That's a 23,000 almost 24,000 TEU vessels. That's a lot. A lot of containers on one ship at one time. That is just scary because these things are bigger, there's more risk. Your freight may be fine, but the freight mix you may not be, right? That ship may topple over. There's things that can happen right? We look at the OOCL Hong Kong this thing about this, right? 2017, it was the largest container ship, right? It was 399 meters long, 58 meters wide. It was 21,000 TEUs. In the last 6 years, up through 2023, there are 51 ships that are now larger than this one. Mind you, this almost 21,000 TEUs. There's 51 ships larger than this one. So we talk about magnitude of loss, right, the concentration of value, right? There's more value on a ship at one time traveling in the ocean, right? And we know what's going on in the Red Sea, right? So there's a lot more risk out there, right? I'm just trying to -- not trying to scare anybody, but just -- the ships are getting bigger and they're putting more freight on them. And as you may know, a lot of organizations are packing their containers full of goods to maximize their dollar, right? So they're putting more cargo in these containers, maxing the weight out and possibly putting a lot more value in those containers as well. So are you insured should something happen to your cargo? Like in Turkey, this happened last year, February of 2023 about actually a year ago. It was at the port, there's an earthquake, there's an act of god. Liability was 0, right? So anybody didn't have cargo insurance, liability was 0. They got nothing because it was an act of god. So there's 3,600 containers, I believe, lost. Nobody on this call did anything wrong, right? If you had containers in there in that port. We can't control what happens with the act of god, right? And then the one that's back from November of 2020, the Apus ONE, 1,800 containers went overboard, right? There's hundreds of containers that were damaged, total losses, right? So you all may still be impacted from this. Some you may still be working on claims for this one. I know I've dealt with a couple of customers recently that we're still working through the claims, it's legal and everything else trying to get some money back. So there was a delay, there was all kinds of stuff that happened with that one. And then warehousing, right? I think we talked about transportation all day long, air, ocean, truck, there's a lot of risk there. I think one of the things that we think about is -- we don't think about is the warehouse, right? And there's this thing freight at rest is freight at risk, right? So the longer freight sits in a warehouse, the more risk there is. I used to be in the safety space and dealing with fire sprinklers and what have you. Those are only designed for life safety. They're only designed to get people out of the building safely. They're not designed to protect your cargo. Those water tanks can only run for so long. If you look at any building, you look at the sprinkler configuration, they're all designed to get you out of the building. If you follow the sprinkler heads, they're designed to an exit door somewhere in the building. There -- even if you were relying on that to protect your cargo and then you got wet, soggy cargo that's got smoke inhalation. So it's not worth it, right? So what I'm going to bring up is cargo that sits in a warehouse that like this one that caught on fire, months and months and months of delays, right? Now this customer is losing product, are losing sales, sorry, because they don't have the product. Their competition is coming into play, right? These are things that are happening. So think about longevity, right? How do we maximize our space, but also make sure we don't have a concentration of $100 million in one part of the warehouse, and we're storing lithium-ion batteries next to it that are very volatile. Think about the way you're warehouses are laid out. And then do you have fire-suppression system that fire-rated walls within your organization to protect the higher-value cargo, right? Think of these things that how do you mitigate your loss should something happen at the middle of the night when you're not there, right? Because fires, they don't just like pick a time they're going to start, they just start whenever. So it can happen. So why do I bring all this up, I am not trying to scare you because it's just like, hey, risk is everywhere. From the beginning to the end, in between. And like I said in the warehouse, a lot of people like, "Oh my freight is in the warehouse, good." Possibly, but that's just the fire. You got earthquakes. You got flooding, you've got warehouse operators. We've seen some sink holes that have happened that's gobbled up freight, especially on the West Coast. So it happens, right? So just think about are you protected? Do you have the right amount of insurance for what you're moving through the supply chain. So let's move into freight carrier liability versus insurance, right? So I talked about liability and we're going to talk about insurance, right? What happens when something happens like this APL England, right? 40 containers went overboard. 70-plus were damaged. It's going from Ningbo to Melbourne, right? Again, nothing that you're doing wrong, we can't control the weather, right? We can't control what happens out in the rough seas. These containers go overboard and they overboard a lot. General average sometimes applies, right? So let's talk about freight carrier liability. So it's something that's been out there for a while now. It's basically your baseline of your industry term of conditions, if you want to look at it that way, it's an efficient easy way to calculate what that payout would be if the carrier is found liable. Air has a per kilo, the ocean has a per container or per shipping units and then the trucking has a per pound and warehouse has a per pound. You're pretty standard out there. And really, there's defenses, right? So each carrier has a list of defenses, which I'll cover here in a minute, but they can utilize saying, "Oh, you know what, I'm not going to pay this because of this." And not only that, the time that the freight carrier will take to abide by these legal liability. And they've got up to a year -- almost 2 years in some cases to battle you basically of getting your money back. So but as I mentioned the carrier must be liable and negligent for them to be able to pay out. And a lot of times, they're not. And these are what you're going to get, right? So if you gave cargo to Expeditors, we're not ensuring your cargo automatically, no freight forwarder is going to unless you buy a cargo insurance transaction in your policy, which I'll talk about a little bit later. But if something happens, we're going to give it to the ocean carrier, right? And they're going to take it and if something happens to that container. If it falls off the ship, it gets damaged in transit, whatever it may be, the carrier could be liable for up to $500 per customer freight unit. Most people just say it's container depends on how we tendered it. So $500, right? If your cargo is only $100, it's in that container, you're probably pretty good. But you got lost sales, you got to recreate your product. But you have $10,000, $100,000 or $300,000 in a container, your freight carrier liability that the carrier would pay back would be $500 per unit, right? So if you got 3 containers and they all 3 went overboard for whatever reason, you get $1,500 back, right, if the carrier is found liable and they're negligent in that. Air, a lot smaller products, more -- a quicker turnaround time. They're going to pay possibly up to $30 per kilogram or the equivalent of 22 special drawing rights which is like a currency for I think the top 5 currencies in the world, they look at it every 5 years. U.S. is about $30 a kilo. It fluctuates, obviously, with currencies. But $30 a kilo, so for every one kilo of lost or damaged goods, $30 is what the airline could be liable for. And then trucking is $0.50 a pound, right? So that's a very low one, right? So if you give freight to a trucker, it's 5,000 pounds, $0.50 a pound, you do the math, it's $2,500 that you would possibly get back. We see a lot of truck fires, obviously, a lot of theft. Again, freight sitting at that truck stops, what have you. In fact we had one not too long ago where a customer had cargo delivered to their dock, but their dock wasn't open yet, to say, just wait outside until we open in the next 2 hours. While that trucker was waiting, they got broken into as the driver was sleeping. And he was in the truck and they broke into it and he didn't even know, and they stole the product out of the truck, while he was sitting at the customer's yard. It happens, it's crazy. And then warehousing, it's $0.50 a pound. As a legal liability up to $50 maximum per lot. A lot is basically however, your distribution warehouse agreement was set, but what a lot is. It could be a box. It could be a crate, it could be a skid, whatever you deem it is, $50 is the maximum you would get back for warehousing. So $0.50 a pound, but no more than $50 per lot, okay? And as I mentioned, the value and the type of goods has no impact on the freight charges or the carrier's liability. As I mentioned earlier, the carriers, they are moving freight across the dock or on the plane, the vessel, they don't care, right? They're just moving it to a point, they see hundreds or thousands of products daily or weekly. You're just one of them, right? So they're just moving across, if it gets damaged like ah whatever, we will just deal with it later, right? And it happens, happened a lot, I deal lot with the carrier legal liability. For customers that aren't insured or their deductible with their current insurance provider is very high, and it's higher than what that shipping value was. So they're not covered. Okay. So let's give you a little breakdown of how carrier liability works versus cargo insurance, right? So these are things that can happen to cargo, whether it's loss or damage, just not everything. But some of you all may have dealt with some of these things in your life in the freight supply chain world. Loss of market value, acts of war, strikes, carrier dropped the freight. That happens a lot, happened just yesterday in one of the airlines warehouse in Seattle. It happens, right? So if these things happen and you had cargo insurance all the things in the brighter red color would be covered by cargo insurance, whether it's transactional or policy. We would go through the process, documenting it, pictures, et cetera, et cetera, and a claim payment is made. And the claim payment is the value of your goods. So if it says, make it easy number, $10,000, will pay you the $10,000 plus the freight cost and the duty, if you had any duty an additional 10% on top of that, that's your CIF plus 10. That's your insured claim payment, right? And that's paid out pretty quickly if you had cargo insurance. If you didn't have cargo insurance and you're subject to legal liability, like we were talking about earlier, the $500 for ocean or $30 a kilo for air or $0.50 a pound for trucking. These are the only things that carrier could be liable for, right? Not a lot. It really just trims it down of what they could be liable for, right? And that's only if they are found negligent and damaging or losing these goods. And as I mentioned, they have, in some cases, a year up to 2 years to resolve said claim. So you have lost sales, lost products, damaged product for that length of time before you get anything back. And if you do get anything back, is a very small fraction of what your cost of your goods are. So still little economics here, so we have 3 shipments -- 3 ocean shipments, there are 20 pallets each, right, just to show you how this works. Furniture, cellphones and pharma, we'll make it simple. And the value for container range from $25,000 for furniture up to $50 million for pharma, right? So some maybe higher, some maybe lower, but this is just for demonstration purposes. So the freight charge $5, 000, would say it's $5,000 for each one of these, each container. Should this happen, so to say, the container -- these 3 containers went overboard, and they all add 20 pallets each, $10,000 is all its going to be paid out possibly if the carrier is found liable, right? That doesn't even help pay a fraction of the furniture and for sure, doesn't pay the pharma, right? So -- and that's only if the carrier is liable and that could take 6 months or a year to get that back from the ocean carrier because COGSA, which is Carriage of Goods by Sea Act has placed these limits there for air, for ocean, for trucking. Because if you imagine every provider not having a limit as far as what they can pay out, they don't want to bill you up because everybody is filing claims with them, and there would be no cap per se. So that's why that capital of $500 is what's there because they're encouraging the customers to buy cargo insurance, to help supplement whatever losses may happen. It's on the back of the bill of 80, right? What the rules for COGSA are and what they could pay out. And as I mentioned, the carriers are going to have defenses, right? There's 17 total defenses listed in all of them. There's 17 defenses that they can use for general liability or cargo liability of why they won't pay out that $500 for ocean or that $3 per kilo. Because they want you to buy cargo insurance. They're 0like, "Hey, this is all we're going to pay out. And these are all things that we can use in our defense to deny your claim to us, Mr. Customer." Some of these seem kind of crazy, but some of these are legit, right? Act of war, act of nature, act of god, terrorism, striking, you name it, right? One thing that won't be paid out for cargo insurance is insufficient packaging. Obviously, it's pretty standard rates, if you're shipping a big motor and you got a plastic bag around it, it's probably not going to be covered. We want to make sure that you're doing what you can to mitigate your loss. But when it comes to cargo liability, that's the first thing, oh, it wasn't packed correctly, boom, done, right? They're going to deny it. So just think about that whenever you're dealing with liability, the carrier has lots of defenses to deny basically those claims. So liability review. So as I mentioned, the carrier liability is limited. They have a lot of conventions that say, hey, this is when our liability applies and this is how much we're going to pay out. And as I mentioned, it varies by mode, they have air, ocean, truck and warehouse. They're all different, but they'll have a cap of what they could pay out for liability. You're not insured with extras automatically. If you move cargo with expeditors or any freight forwarder and something happens, whatever claim payment we get from the ocean carrier say it's $500, we're going to give you back that $500, right? It just goes straight. We just move it over. And for the carriers, they're going to have lots of defenses, right, because they're going to -- if they do pay out based off of the weight, the piece count or the dimensions, but they're going to have defenses that they're going to utilize to deny those claims or it's going to take a long time. I've seen claims take up over a year to resolve with the carriers. And that's a lot of headache. Just think about that as you're trying to process your shipments. Do you have the right amount of insurance? Are you insured or it's going to be subsequent legal liability and just be ready for that, if something does happen with the carrier. All right. So let's talk about cargo insurance. We call it all risk cargo insurance because it was always put in quotations because it is all risk, but there are some exclusions, right? Some being insufficient packaging, loss of market value, right? Those are your 2 biggest ones that while we can't say it's all risk without the quotations because there are some exclusions to all risk cargo insurance. But outside of that, it protects you from physical loss or damage from external source during transit, right? And this applies across the entire gamut, right? International, domestic, small pack stock, which is your warehouse. It covers you, right, from end-to-end, door-to-door when you're buying cargo unless you opt out of door-to-door service, but it does cover you from end-to-end. And when you're looking at your cargo policies are you looking to shop cargo policies to make sure you're getting what's going to fit your supply chain from door to door or if you have warehouses in between is going to stay sitting idle for x amount of months, make sure you're including that in your cargo insurance proposals. Because as I mentioned earlier, freight at rest is freight at risk. So you maybe get that freight there quickly, move in air freight, and then it's just sitting in the warehouse for 3 months, something happens, a fire, flood, earthquake, it gets broken into, they steal your goods for whatever reason, it happens. So just think about how you're protected and what mitigation measures you have in place. So why is ensuring your supply chain important, right? So when loss, damage occurs, it prevents your out of pocket expenses. It provides you funds pretty quickly. Claims usually pay pretty quickly. You're protecting your business income or you're getting additional money and additional 10% come back to you to reorder supplies or kind of recoup whatever loss you may have had. It may not make you a whole 100%, but it's going to get you pay quicker to start your process again to get that money flowing back in your supply chain. Some you have letters of credits. There's terms of sales agreements. They want to make sure that the cargo was insured for the buyer. And then almost always, the claims are paid promptly. Fully documented claims are usually paid within 30 days. I've seen them paid within 18 days. It just depends on the severity of the claim, how much documentation is provided upfront and how responsive the claimant is to the claims individual handling it. So but like I said, it's pretty quick. As long as we get everything documented claim payments are made very, very quickly for expeditors. So there are 2 options for ensuring your freight. There's what we call transactional, which is when you just call and say, I want to add insurance to the shipment. It's a one-by-one insurance that applies to that one shipment that's using your higher rate, it's like your market rate, but it is a line item on your billing invoice, right? So this one shipment is quoted and insured any future ones are not. They have to be added individually at your request. That's your transactional. Like I said, it's a little bit, it's easier because I see a line item. They want to see a breakdown of everything they're being billed for and insurance being one of those. And then it just protects you for that one, but it is a higher rate, right? It is your market rate, we call it. And then you can opt to go into a policy, right? If you're moving a lot of value per month or per year, you may benefit from a cargo policy because you get a huge savings on the insurance price annually. And that's when we go out and we shop the market for you, if we can't do it in our in-house program and then you get a lot lower rate than what the current market is for transactional. And then those are your bills on whatever cadence you like. If you want to build quarterly, semiannually or annually, we work with you to whatever fits your billing structure, whatever you like. So they're a little bit easier, and it basically can cover you, online transactional annual insurance policies can cover you from end to end, and it covers not only stuff that you move with Expeditors. So if you're moving 50% of your cargo with Expeditors and 25% with DSV and 25% with these guys whatever or whatever. The insurance policy, we can include all of that. So you just have one policy that kind of covers your entire supply chain. Even small pack warehousing, domestic trucking, you name it, right? We do exhibitions. We can do a lot of trade shows. We can include all that in one comprehensive policy that would cover you and your supply chain regardless if you use Expeditors or not. That's only available on the policies because obviously transaction, we have to bill on each file we handle. But policies we bill that, as I mentioned, quarterly, annually or semiannually, but we can include non-expeditors movements within that policy. So talk about transactional, it's all risk covers you for one shipment or say, hey, Rob, I've got a small project for the next 6 months. I don't want to buy a cargo policy. Can you work with me on just doing a series of shipments? Yes, we can do that, right? If you just want to ensure -- we did a real cool key resort in Lake Toho last year. It was for 10 months. So we insured all the trucks that were going up there for those 10 months. So if you have something that's like a short-term project that you want to commit to a policy, we can do a series transactional, which it would just be built on a per shipment basis. But for you, you would see it and then it would end whenever your project ends, we stop billing it. So it's an easy way to just make sure you're protected for that small project up to 2 years. And then the rate is very cheap, right? It's $45, roughly for about $10,000 of coverage. That's going to vary by market. But for the most part, it's a pretty flat rate. So for every $10,000 of coverage, it's $0.45. This is your transactional. This is the market rate. As I mentioned, with a policy, you get a little bit -- actually a lot more discount on that and your close is based on the value of our shipment. And what a lot of customers like to do for transactional if they may already have a global policy, but their deductible is really high, right? I've talked to a lot of customers with deductible $100,000, $250,000 for instance, per conveyance, but they're paying out, but their average shipping value is like $80,000 or $50,000 so they can buy a transactional and there's no deductible whenever you're buying transactional. Obviously, if you're shipping like glass or ceramics, automobiles, there's a little bit of deductible. But for general commodities, there's no deductible for transactional. And it's really good for customers that have a high deductible policy. And then for the annual insurance policy, right? It's basically, I mentioned its warehouse to warehouse, end-to-end coverage. It's regardless of what provider you use, you can use Expeditors, or a myriad of providers or just Expeditors, we'll cover you either way. Easy claims process. We help you through the claims process. We have a claims team that's dedicated to you. And your rates are determined by your annual value. So by what you're moving. And if you say, hey, Rob, I normally move $5 million per year, but this year was great, we did $7 million, am I covered? Yes, you're still covered. We just do a true-up at the end of the year for whatever the excess is, but we can give it to you at the discounted rate as that true up. We personalize a policy for you, right? It's your policy, it's for your company. It adapts to what you need. Everybody gets the same policy because everybody's got different business models. So we want to make sure it fits what you're doing. So with that being said, just review, risk is everywhere, right? So risk can happen anywhere in the supply chain, as I showed you, from your door, all the way to your customers' door and all the steps in between. It's about 5 to 8, sometimes 12 instances that can occur. Carrier liability is very limited, right? So you get $500 for ocean, $30 a kilogram for air and $0.50 a pound for trucking and warehouse, but for warehouse, the $50 maximum per lot. And if the liability applies, the carrier can say, "Hey, I don't need to pay this because I have defenses because this happened, this happened, this happened." And then if you wanted a cargo insurance, there's 2 options. You can purchase transactionally through your Expeditors agent or wherever you're buying insurance from or you can buy a policy. And that would cover you from -- with Expeditors goods or anybody you're not using it Expeditors. And I can mention you could cover your small pack, your warehouses, and your domestic carriers as well. And then one thing that we like throughout there is exhibition, right? Because I know a lot of people -- I tell you make yourselves, right? Your new products are coming out. You go in to Las Vegas, these cool shows or whatever, we can cover the transportation too. The exhibitions as well as the product you bring into the exhibitions should something happen in the setup or take down or what have you. Those are also part of the policies. And then just some informative resources, we have some logs out there for ECIB, which is our insurance -- Expeditors Cargo Insurance Brokers. There's an insider and I believe this presentation is being shared, but those 2 QR codes, if you like, to scan those to get on those mailing list, good information that came out on a regular basis. And then I'm always happy to connect with anybody. So my QR code is right here, my LinkedIn QR code. So if you'd like to connect with me, I welcome anybody that way I can -- as I update ECIB blogs or whatever, and you don't want to subscribe to 15 different things, you can subscribe to me. And as I get information, I share a lot of the same outward, so you can just get it from me or if you want to connect and here in town in Houston or I'm up in your neck of the woods, you want to catch a coffee, I'm up for that, too. My phone number i's there. And then lastly, I'll leave you with this before I hand it over to Ben. Don't do this in warehouses. This is not covered by insurance. So risk is everywhere, even when you're not looking. That's the basis of this picture. Things happen when they're not looking, and it's scary what's out there because we don't control everybody what they do. So for that, I'll leave it to Ben for a Q&A session.

Thanks. All right. So going through our questions here. This is a good one. Is transactional insurance covering door to door?

Yes. Transactional insurance when you buy it through Expeditors, so the way the transactional insurance works, whenever you're quoting with Expeditors you say, I want to add insurance to the shipment say it's coming from Shanghai to the United States. It will start whenever we pick up the goods. So whenever the goods are picked up from your dock, it will carry that insurance all the way to the delivery point in the United States. So it is door-to-door, unless you opt out and you say, I only want to cover it from the airport to the airport. But traditionally, the transactional is covered door-to-door.

So you can select which portions in transport you can insure or?

It's automatically set for door-to-door. But whenever you go -- if there was a claim you would not be -- if you say I don't want to be covered for this piece, you're still going to pay the same rate. So it makes sense to do door-to-door because it's covering you now. If something happened and you delivered it and say, the customer delivered it from their Shanghai warehouse to our warehouse and happened on that segment, it wouldn't be covered because Expeditors wasn't the one that was contracted to pick up those goods. That's why I always say it's door-to-door when we pick up the goods whenever we pick it up from your dock and bring it to our dock and onward.

Let's see, just waiting for some more questions to come in. Okay. Here's one. Where do you see insurance rates going just with the current market think that's kind of in relation to, obviously, Red Sea and all sorts of things going on.

Right now the insurance rates are staying steady. I review for the West Coast, I review every single policy customer that we have when they are due for renewal, and I look at where they were in the last 5 years for their insurance rate. And it's like I said over the last 5 years, it's been up and down, up and down. The last 2 years, it's been pretty steady. We've been able to give some reduction to some customers. We always keep an eye on what's happening in the market, different like -- Russia, different parts of the world where maybe customers do business, we're taking those off of the policies, but we're still trying to keep the rates the same, at least for Expeditors, when we move it with Expeditors. So I'd say for right now, what we're seeing is staying steady. It's coming down in some cases, like you have a very easy poor payers. Commodities is not high theft commodity or a high breakable commodity, we could probably give a reduction over time, all right? And that's what I'm seeing on the current policies.

Okay. Great. Here's one. Is insurance tied to actually who owns the cargo? This person is often shipping on behalf of their client. If they have an annual insurance plan, would that cover when they ship cargo owned by someone else other than our own company?

Can you say that again, sorry, I am trying to process. If we have...

They don't own the cargo. They're often shipping on behalf of the clients if -- and if they have their own annual insurance plan, would that cover the cargo that they're moving even though they're shipping on behalf of someone other than their own company?

I would say it starts with equal terms. So if you have an equal term set with the buyer, the seller. I think with that, would start determining who owns the goods. But if you have your own cargo insurance policy and they don't, and you're the one paying the bill to said provider and that provider be a freight provider, you can then be recouped for that insurance, right? So if something happened, you're insuring those goods. But I would advise that if your current policy doesn't have the limits for that product, and you want to insure you need to make sure your limits are updated to reflect whatever you're moving. So let's just say your current limits are $50,000 per movement, and that's always $100,000 per movement and something happens, you want to insure it you're only going to be paid at that $50,000. So if you want to put it on your policy, you can because you're basically the one moving the goods from point A to point B, and you're the one selling or handling the movement that you didn't own, your limits would want to be sufficient for when you're moving.

Okay. Great. See, just wait for some other questions that come in. Looks like we've answered all the ones that people have submitted so far. We'll just give it like another 20 seconds or so to see if any others come in, and then we can move on to close out today's presentation. And we got a question, will you e-mail the slides out of the webinar? Yes, which I'll kind of -- I think we can go ahead and move along to close this out. But on that note, following today's webinar, you all are going to receive a brief survey from us. And we really appreciate it if you could fill that out. It's just a quick survey, lets us know how we did. And then also your feedback helps us with crafting future webinar events. Once you complete that survey, you will receive a copy of today's presentation along with a link to the webinar recording. But yes, with that being said, we -- this slide here shows our upcoming webinar schedules. So Expeditors, we host webinars on a whole host of topics. So you can see coming up, we've got our Onyx Strategic Insights. That group is presenting geopolitical hotspots and their impact on supply chains, obviously, a lot going on in the supply chain world right now. And that will have 2 different sessions available. And then on the 29th, we've got Understanding the EU’s Carbon Border Adjustment Mechanism as a US-based Company and then as always Incoterms is always one of our most popular topics on March 5. We're going to have a basic introduction to Incoterms webinar. So on the right-hand side there, there's some QR codes. Again, this will be included on a copy of the presentation that you received. And then if you could go to the next slide, Rob, I think it just covers kind of what you covered already. Our Horizon Brief is a really popular newsletter that we send out. It includes links and news with our upcoming webinar schedule, such as today's webinar, along with industry news, updates, and other great things that we offer here at Expeditors. So that QR code there, you can scan that and subscribe. And with that being said, I think that's about -- yes, there's the survey reminder. Please fill out that survey. And once you do that, we'll gift you with today's presentation. But with that, thank you, everyone, for joining us today. We really appreciate it. I hope this was helpful and informative. Thank you, Rob, for presenting and we hope you all have a fantastic day.

Take care. Thank you.

Thank you, everyone.