Supply Chain Insurance and Business Interruption

Supply Chain Risk Insurance

Modern supply chains are globally interconnected and vulnerable to disruption from natural disasters, pandemics, geopolitical events, and cyberattacks. Traditional property insurance includes contingent business interruption (CBI) coverage, which pays for the insured's lost income when a supplier or customer suffers physical damage. However, CBI coverage typically requires physical damage to trigger, leaving gaps for non-damage disruptions like port closures, trade sanctions, or pandemic-related shutdowns.

Actuarial Modeling

Modeling supply chain risk is complex because it requires understanding interdependencies between the insured, their suppliers, their suppliers' suppliers, and their customers. Many companies lack visibility beyond their first-tier suppliers, making exposure quantification difficult. Actuaries use network analysis, scenario modeling, and catastrophe model outputs to estimate potential losses. The pandemic highlighted the need for broader supply chain coverage, leading to new parametric products that pay based on measurable triggers (like port closure duration) rather than traditional loss adjustment. Pricing these products requires innovative approaches to risk assessment and data collection.