Non-Damage BI Insurance: Protecting Global Supply Chains

Descartes’ parametric non-damage business interruption insurance offers valuable capacity against earthquake events that significantly impact the essential inputs of a firm and results in severe financial consequences.

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Introducing non-damage BI for supply chain risks

For exposed revenues affected by supply chain disruptions around the world...

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Product details

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Risk covered

Indirect financial losses resulting from an earthquake

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Client profile

Organizations with an external vulnerability to disruption from an earthquake

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Insured location

Client-specified location(s) producing an essential input

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Index

Earthquake intensity (MMI scale) reported at specified location

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Limit

Up to $75 million per contract

In today’s interconnected world, many businesses, especially those in the consumer electronics industry, rely heavily on global supply chains for essential components like semiconductors. These critical inputs are the backbone of their operations, and any disruption can have a significant impact on revenue and ongoing expenses. To mitigate these risks, sophisticated risk management programs are increasingly turning to non-damage business interruption (NDBI) insurance, specifically designed to address the financial consequences of supply chain interruptions caused by natural catastrophes such as earthquakes.

Parametric Non-Damage Business Interruption Insurance

Non-damage business interruption insurance is a specialized coverage that protects businesses from financial losses due to interruptions in their operations, even when there is no physical damage to their property. For businesses with sophisticated risk management programs, NDBI insurance offers several key benefits:

  1. Risk Transfer: By transferring the risk of supply chain interruptions to insurers, companies can protect their balance sheets from significant financial impacts.
  2. Financial Stability: NDBI insurance helps maintain cash flow and cover ongoing expenses during periods of disruption, ensuring that operations can continue as smoothly as possible.
  3. Financial Freedom: Unlike traditional insurance policies, parametric insurance allows clients the freedom to use payments flexibly to cover any costs incurred due to the event.
  4. Customization: Policies can be tailored to address specific vulnerabilities within an organization’s supply chain, ensuring that coverage is aligned with the company’s unique risk profile.

The Importance of NDBI Insurance for Earthquake Events

Earthquakes can cause major disruptions in global supply chains, particularly for firms that depend on key suppliers located in seismically active regions. When an earthquake occurs at a supplier’s location, it can halt the production and shipment of essential supplies, leading to significant business interruption for clients down the line. Without these critical inputs, companies may face severe financial losses, increased costs, and operational challenges.

Case Study: Descartes Protects the Supply Chain of a Consumer Electronics Company

Consider a consumer electronics company that relies on semiconductors from a key supplier in an earthquake-prone area. If an earthquake strikes, it could halt the supplier’s semiconductor production, causing a ripple effect that disrupts the client company’s entire production line. The resulting business interruption can lead to lost revenue, additional costs to find alternative suppliers, and more.

Descartes’ parametric non-damage business interruption insurance provides a robust solution for consumer electronics companies dependent on key suppliers in earthquake-prone areas. By offering swift financial relief to cover lost revenue and the costs of finding alternative suppliers, this insurance helps ensure the company’s production line remains resilient, mitigating financial impacts, meeting investor expectations, and maintaining business continuity despite supply chain disruptions.

case study example

A consumer electronics company relies on semiconductors for their products and needs large insurance limits to cover potential revenue losses if their supply is disrupted.

Problem

Identified Vulnerability: Semiconductor suppliers in Taiwan and Japan, are vulnerable to earthquakes that would affect the client’s ability to produce.

Solution

Parametric policy that offers the financial freedom to protect against: 

  • Revenue loss from supply chain disruption
  • Price hikes of chips due to scarcity 
  • Additional costs of finding a new supplier
  • & any other indirect financial loss...

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