Supply chain disruption cover is lacking: Airmic

Sales of dedicated supply chain disruption insurance are low because they do not meet customers’ needs, according to Airmic research.

Airmic said that risk managers think that the disruption insurance outside standard property and business interruption cover is too expensive. Risk managers also think that collecting the relevant risk information is too complicated, and that policy wordings are often unclear about payouts.

The research said: “There are a number of supply chain insurance products currently being offered and certain business sectors are seriously considering the purchase of such insurance. However, events that can disrupt normal business operations are often unpredictable and the scope of cover offered is considered to be insufficient by many Airmic members.”

The main take-up for supply chain insurance has been among pharmaceutical, motor and food manufacturing firms but enthusiasm is muted even here, according to the report.

Airmic technical director Paul Hopkin said: “Some insurance companies and brokers have worked very hard to deliver workable solutions, but it is proving to be challenging for them to deliver the right products in relation to increasingly complex supply chains. This is an area where, for most companies, risk management and mitigation strategies are often seen to be more cost-effective than the insurance products currently available.

“Last year’s natural catastrophes, which caused so much disruption to supply chains, have heightened interest in insurance solutions but not altered the fundamental logic.”

Airmic is talking to insurers to try to fix the problem.