The Impact of the ILA Strike on the P/C Insurance Industry: A Detailed Analysis

Introduction to the ILA Strike

The International Longshoremen’s Association (ILA) strike, which commenced on October 1, has disrupted operations at over 20 ports along the Eastern Seaboard and Gulf Coast, including major hubs like New York, New Jersey, Baltimore, and Houston. This strike has significant implications for the property/casualty (P/C) insurance industry, particularly affecting homeowners, personal and commercial auto, and commercial property insurance.

Direct and Indirect Impacts on the P/C Industry

The strike could lead to increased replacement costs and delays in the supply and replacement of various goods, including garments, furniture, European-made vehicles, vehicle parts, and concrete for commercial construction. However, the impact is expected to be mitigated by existing inventories and just-in-time supply chains. According to Triple-I, the strike would need to last one to two weeks to trigger sustained increases in P/C replacement costs or accelerate a current slowdown in P/C underlying growth.

Insurance Coverage and Potential Losses

The insurance industry could also face losses from coverage protecting against adverse business costs due to events like strikes, including business interruption, political risk, credit, supply-chain insurance, and marine and cargo insurance. Most such policies have waiting periods of five to 10 days and deductibles before payment is triggered, limiting potential losses if the strike lasts less than one to two weeks. The 2021 Long Beach, California, longshoremen’s strike, which lasted one week, serves as a recent precedent.

In conclusion, while the ILA strike poses a potential risk to the P/C insurance industry, its impact will largely depend on the duration of the strike. Insurers should monitor the situation closely and be prepared to adjust their strategies accordingly. For consumers, it’s advisable to review their insurance policies and understand the coverage related to business interruption and supply chain disruptions.