Supply chain insurance has become increasingly vital for businesses as they face a complex web of risks and interruptions in their supply chains. The COVID-19 pandemic highlighted the limitations of traditional business interruption insurance and led to a surge in demand for supply chain insurance. This article explores the evolving landscape of supply chain insurance, the expanding coverage options, the impact of recent events on the sector, the emergence of parametric insurance, and key considerations when procuring insurance.
The Growing Importance of Supply Chain Insurance:
The supply chain insurancecategory is projected to grow at a compound annual growth rate (CAGR) of 4.5% from 2023 to 2030. With intricate interactions between vendors, suppliers, and customers, disruptions in one link can result in significant losses throughout the entire supply chain. This makes supply chain insurance coverage crucial, especially for companies reliant on major suppliers' manufacturing capacity.
Expanding Coverage Options:
In response to the challenges posed by the pandemic, insurance companies have expanded their offerings beyond traditional Business Interruption (BI) and Contingent Business Interruption (CBI) policies. Coverage now includes Non-Damage Business Interruption (NDBI) Insurance, Product Recall Insurance, Stock Throughput (STP) Insurance, Trade Disruption Insurance (TDI), Terrorism Insurance, Political Risk Insurance, and Cyber Insurance. This diversification has intensified competition among providers and reduced their bargaining power.
The Rise of Parametric Insurance:
Parametric insurance solutions have emerged to address nuanced or self-contained risks. Leveraging technologies like blockchain, automation, and real-time IoT data processing, these solutions offer real-time analytics to monitor predefined risks. If a predefined condition is violated, a prearranged claim is automatically triggered. Parametric-enabled digital insurance products provide a more efficient and streamlined approach to risk compensation.
Impact of Recent Events on Supply Chain Insurance:
Events such as the COVID-19 pandemic, the severe winter storm URI in Texas, the Suez Canal closure, and the cyberattack on the Colonial Pipeline Company have highlighted the vulnerabilities of supply chains. These incidents have contributed to the increasing demand for supply chain insurance globally. Insurance companies have faced challenges in adapting their policies to cover losses resulting from unforeseen events, leading to increased litigation and difficulties for the sector.
Key Considerations in Procuring Supply Chain Insurance:
When selecting an insurance provider, organizations should thoroughly review and assess policies to address common gaps. It's essential to discuss unique risks with advisors and consider additional or complementary coverage if necessary. Topics to discuss during the purchasing process include exclusions, coverage scope, waiting periods, duration, financial and geographical limits, and proof of loss. Sourcing practices, such as identifying backup vendors, revisiting procurement contracts to reduce liabilities, and developing contingency plans, also play a crucial role in supply chain risk management.
Key Suppliers
Zurich Insurance Group Ltd., American International Group Inc., Berkshire Hathaway Inc., Munich RE, Allianz SE, Marsh LLC, If P&C Insurance Ltd, Swiss Re, Morris & Reynolds Insurance, and Kaercher Insurance
Order your copy of the Supply Chain Insurance Procurement Intelligence Report, 2023 - 2030, published by Grand View Research, to get more details regarding day one, quick wins, portfolio analysis, key negotiation strategies of key suppliers, and low-cost/best-cost sourcing analysis
https://www.grandviewresearch.com/pipeline/supply-chain-insurance-market-procurement-intelligence-report/request/rs15
