As companies stretch their supply chains around the world, accumulating risks along the way, insurance products are evolving to better protect against those risks.
Traditional insurance for supply chain risks involves contingent business interruption, which is an extension of a company's property policy. Contingent business interruption comes into play if a company's suppliers suffer property damage from insured perils and the property damage causes the insured company to suffer a business interruption loss, explained Scott Patterson, U.S. leader for property specialized risk at insurance company Marsh.
Because contingent business interruption is part of property coverage, which is triggered by physical damage, companies whose supply chains experience disruptions related to events that don't involve physical damage—such as "strikes, government regulation, [or] volcanic ash clouds"—aren't covered, Patterson said.
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