edi schmid group chief underwriting officer 15th cro ...2c37a738-60b2-4739... · 15th cro assembly,...
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Partnering to insure supply chain riskEdi Schmid
Group Chief Underwriting Officer
15th CRO Assembly, 22 May 2019
Business interruption and supply chain-related
losses typically comprise 50-70% of insured
property catastrophe losses
A high proportion of supply chain losses are
uninsured
large protection gap
Supply chain risk is top-of-mind in the C-Suite of corporates and their re/insurers
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40
36
33
27
20
18
17
14
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Business interruption / supply chain disruption
Cyber incidents
Natural catastrophes
Market developments
Changes in legislation and regulation
Fire/explosion
New technologies
Shortage of skilled workforce
Climate change
Loss of reputation or brand value
Leading risks to businesses in the U.S. 2018Source: Allianz Risk Barometer
BI insurance covers clients’ lost profits and incremental costs in the event an insured peril damages or destroys a
covered property and interrupts production
Business interruption (BI) insurance is an important way to cover the risk of costly supply chain disruptions
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Suppliers Insured Insurer
Contingent business
interruption (CBI)
covers disruptions at
the insured’s supplier
Business interruption (BI)
covers client’s disruptions
Reinsurer
insurance
contract
Business
interruption (BI)
Contingent Business
interruption (CBI)
Physical
damage
e.g., fire at
insured’s factory
e.g., fire at factory of
insured’s supplier
Non-physical
damage
e.g., cyber attack
on insured’s
facilities
e.g., transport
disruption delays
supplies
with increasing complexity, insurers need more transparency on global supply chains
The insurance industry has innovated significantly over the past 25 years and contingent business interruption has grown
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• covered more perils
• covered non-physical damage business interruption
• introduced index-based (parametric) products
Swiss Re’s P&C reinsurance solutions team can advise insurance clients on supply chain risks and reinsure them
RIMS 2019
AXA XL and Swiss Re join
forces on supply chain
https://www.swissre.com/
reinsurance/property-and-
casualty/solutions.html
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The dry and warm summer of 2018
left water levels of most rivers in
Europe at record low levels
Shipping was disrupted
• alternative modes of transport
triggered additional costs
• Production was impacted
Swiss Re Corporate Solutions crafts innovative parametric nat cat solutions to address supply chain risk for clients
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“FLOW” pays policyholder a
fixed amount per day if the river
level is outside a given range
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Swiss Re Corporate Solutions adds non-physical damage to CBI cover
The closure of a small stretch of track
near Rastatt, Germany on Europe’s
busiest rail corridor interrupted cargo
shipments between Karlsruhe and
Basel for 7 weeks in 2017
� Offer stand-alone combined non-physical damage
(NDBI) along with contingent damage business
interruption (CBI) policy covering fire, natural perils and
supervisory / safety regulations
A detailed
understanding of
transport
vulnerabilities and
clients’ supply
chain is critical for
the insurer
Goal is to identify supplier/product combinations that are unique and critical to an insured
Mapping supply chains is critical to managing and insuring supply chain risks
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Magnesium
die casting
ProductMeridian
Lightweight
(US)
Supplier
China
Supplier
Germany
…
Insured
Suppliers Insight: Spartanburg SC production is
reliant upon one US-based supplier
• Data submitted by corporates to insurers often lacks critical details to enable identification of bottlenecks
– locations
– Tier 2 suppliers
– back-up inventory levels
– …
• No standardized format (template) to exchange data like for property and life insurance
Mapping supply chains is arduous work
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External data -
often unstructured
but increasingly
accessible - can
be integrated
Detailed company
information on
suppliers and
products
• Helps insurance clients develop more robust business
continuity plans
• Helps re/insurers offer more coverage…
– better define risk appetite
– manage accumulation risk - Re/insurers need to
construct the supply chain for the entire industry, not just
for a single company
– develop innovative insurance solutions (e.g., parametric
triggers)
… to close the protection gap
Constructing and sharing supply chain maps is worth the investment
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We need to work together to increase supply chain risk coverage
Low High
Likelihood Likelihood
High
impact
Low
impact
Peril
Peril
Peril
You have seen how DHL helps clients
construct their supply chain maps
You have seen how Swiss Re continually scans for emerging
risks
Now we need to work together to
ease and standardize the exchange of
supply chain data
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