Zurich has launched a supply chain insurance product in Singapore and Hong Kong which provides risk assessment services and protect businesses against the risks associated with supply chain management disruptions, delays or failures. The service is available immediately to customers based in the two markets, which Zurich said have shown significant interest in such cover. It has been offered to Zurich’s Europe and North American clients for over six years.
Mr Keith Thomas, CEO for Global Corporate Asia Pacific, commented: “Increasing globalisation, improved transport and logistics through to technological advancements have enabled companies to source materials from virtually anywhere in the world. While this provides increased flexibility and cost savings, it can also result in complex supply chains that are highly interconnected, more exposed and difficult to manage.”
Reduce supply chain failures as well as cover such events
Zurich Supply Chain Insurance is designed to reduce the number of supply chain failures, and also to provide cover in the event of an incident whereby supplies are not delivered or are otherwise delayed resulting in a financial impact on a company’s operations.
The policy covers the loss of output of the insured – this “output” is defined according to the specific needs of the insured but typically refers to gross profit or revenue. Thus the policy can cover the loss of profit caused by a covered supply chain disruption, as well as the additional and increased costs of working (such as switching suppliers etc.) as well as liquidated damages costs under contract, said Mr Hassan Karim, Technical Underwriting Manager, Zurich Asia Pacific.
Holistic “all risk” multi-line BI cover
The product has two components—risk assessment and insurance. In the first phase, Zurich Risk Engineers will conduct a comprehensive supply chain risk assessment in order to identify and evaluate customers’ exposure to critical risks throughout their supply chain and recommend prioritised mitigation actions. The results of this risk assessment together with other sources of data are then used to underwrite and price the risk in the second phase. Claims are managed by the Zurich and supported by specialist third parties where necessary.
The claims trigger is simply a reduction in the named supply from the named supplier that results in a loss of output of the insured (subject to policy conditions) and is not sub limited at the lower chain levels. In addition to this, there is also an option to replace traditional post-loss claims settlement with a pre-agreed loss calculation formula (proxy for indemnity) which speeds up claims settlement and provides certainty around claims settlement for those customers that want it.
Mr Karim noted that prior to supply chain cover, companies would have to take out a variety of policies such as contingent business interruption, product liability and trade credit and political insurance to cover supply chain risks, and could still end up with gaps given the coverage limitations of each of those products, usually only related to physical damage and even then often only covering direct suppliers and being heavily sub-limited. In contrast, supply chain insurance offers a holistic “all risk” multi line BI cover which can extend thorough all tiers of the supply chain.
Wide coverage
“At present we can only offer the insurance cover to companies domiciled in the Hong Kong, Singapore, US, Canada and Europe (though the risk assessment element can also be purchased on a standalone basis and can be offered in a wider scope of countries). Having said that, the suppliers could be located anywhere and therefore the disruption could also occur anywhere, however as the loss will occur on the balance sheet of the HK or Singapore company that is where the loss would be paid. It is worth mentioning that the cover also covers non-physical damage disruptions and the cover can extend all the way down through the supply chain to even the raw material level,” Mr Karim further explained.
He indicated that the policy continues to be rolled out globally and is expected to launch in other countries in the near future.