Supply Chain Risk

PAGE 4 Supply Chain Risk Continued • Transportation insurance — Commonly refers to coverage for shipments of an organization’s property on its own vehicles; • Motor truck cargo liability insurance — Coverage for shipments by common carriers who provide transportation services to the public; • Contingent cargo insurance — Coverage for freight brokers in situations where they are liable for loss to cargo they have assigned to a carrier; and • Air and ocean cargo insurance — Specialized forms of coverage subject to international conventions and admiralty law, respectively. In recent years, these types of coverage have been incorporated with warehouse property and liability insurance into “logistics” policies that cover property throughout the course of transit. Although transit and logistics coverage is generally placed by specialists in transportation risk, all parties to a shipment — the shipper, the cargo carrier, and the recipient — should know if and how their interests are protected. Supply chain insurance Insurance for contingent income and transit exposures are valuable for supply chain risk management, but they are limited in that coverage is provided only for physical damage by an insured peril or loss to physical property due to covered liability. Even before the Covid-19 pandemic, Swiss Re, a leading international reinsurer, was advising risk professionals to “look beyond the physical” to other factors that disrupt supply chains, including raw material shortages, product recalls, supplier bankruptcies, port closures, and regulatory actions. In response to this growing range of risks, major insurance companies and brokerages have developed specialized supply-chain insurance packages that cover broader ranges of risk than those addressed in standard property and business income policies, usually on a customized basis for each insured enterprise. These packages are attractive, but costly. It will be some time before non-physical supply chain risks can be insured, even partially, at a rate small- to mid-sized businesses can afford. In the meantime, organizations like BSI and Everstream Analytics, cited in this article, are developing and deploying software to help organizations understand their position in a supply chain and anticipate disruptions. ____________________ 1 “Delivering Supply Chain Resilience: The five questions we need to answer,” 2022 BSI Supply Chain Risk Insights Report, November 2021, p. 3; accessed at https://www.bsigroup.com/en-GB/our-services/ consulting/supply-chain-risk/supply-chain-reports/ 2 Everstream Analytics, Annual Risk Report 2021, April 2021, pp. 9-13; accessed at https://www.everstream.ai/wp-content/ uploads/2021/04/20210408-Everstream-Analytics-Annual-RiskReport.pdf 3 “Delivering Supply Chain Resilience . . .,” op. sit., p. 8 4 Tucker Bailey, Edward Barriball, Arnav Dey, and Ali Sankur, “A practical approach to supply-chain risk management,” McKinsey & Company, March 2019; accessed at https://www.mckinsey.com/businessfunctions/operations/our-insights/a-practical-approach-to-supplychain-risk-management Insights for Your Industry 800.445.1554 | globemw-ai.com Sheila E. Salvatore, Editor | Editor@AdjustersInternational.com Copyright © 2022 Adjusters International, Ltd. All Rights Reserved. Insights for Your Industry® is published as a public service by Adjusters International, Ltd. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases. E07-1025 PROTECTING YOUR PROPERTY

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