Innovative Coverages for Supply Chain Risks


In response to lessons of recent catastrophes, insurers are offering insurance products that protect against business interruption even if there is no physical loss.


“We talk a lot about supply chain and interestingly enough we’ve seen probably over the past three years supply chain products come to the insurance table, where you do not have to have a physical loss or damage to in fact trigger that coverage.”


Duncan C. Ellis, Marsh


The volcano in Iceland is a perfect example of a supply chain disruption that did result from a physical loss. Companies that were dependent on getting product components into and out of Europe had to halt production because air traffic over Europe was shut down due to volcanic ash. Zurich has a product that covers such losses. ISO introduced a special coverage for secondary dependencies so insureds can reach further up the supply chain. Insurers are also responding with new services. Catastrophe risk engineering solutions model potential supply and transportation chain disruptions and how they would affect operations. Unfortunately, many insurance buyers are still looking at traditional business interruption coverages rather than newer supply chain products.


Copyright © 2012 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.


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