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Risk managers reject supply chain insurance products

There are many insurance products available to protect companies against supply chain disruption outside standard property and business interruption cover. However, take-up is low because they do not meet the requirements of potential customers, according to a report from Airmic.

The association’s research found a perception among risk managers that dedicated supply chain insurance is too costly to justify, that collecting the relevant risk information is over-complex and there is a lack of clarity over when and under what circumstances policies will pay out.

“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,” says the report.

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

“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,” said Airmic technical director Paul Hopkin.
“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.”

The report was based on interviews with risk managers, insurers and brokers and a survey of Airmic members. The association is having discussions with insurers about ways to close the gap between customer requirements and what is on offer.

www.airmic.co.uk

•Date: 6th Dec 2012 • UK/World •Type: Article • Topic: Operational risk management

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