or covered end to end?

If there's a silver lining in the current supply chain turmoil, it’s a new appreciation of resilience. For many global businesses, just-in-time supply chain management is yielding to a more evolved, just-in-case mindset. Recent disruptions have reprioritized business continuity even if it means sacrificing the allure of ultra-lean processes and razor-thin inventories.

In other words, more global organizations are coming around to the mindset we’ve always had at FM Global, expressed in our products and services (more below). Although cost-efficiency is still prized, there are fresh reminders that being too lean makes you brittle, or unable to withstand a disruption and recover swiftly. And that’s not cost-effective at all. COVID-19 and clogged ports were a wakeup call as were devastating floods, war in Ukraine and most recently Hurricane Ian in the U.S.

Expect continued supply chain strain for the foreseeable future. Analysts anticipate disruption in 2023 from political unrest, inflation, potential recession, energy crises, trade conflict, labor shortages, ESG legislation and climate disasters. (The U.S. Congress narrowly averted a threatened rail strike just before the holidays.)

Some insurers limit supply chain coverage

Extended supply chains have always harbored risk given that manufacturers and their insurers generally lack visibility and control of partners, especially beyond their "tier one" suppliers and customers. One survey found that only 2% of companies have visibility into their supply base beyond the second tier. This risk has only increased with globalization.

Recent supply chain disruption has intensified demand for insurance coverage of business interruption in the supply chain. It's called contingent business interruption insurance. Because of recent big losses, many insurers (though not FM Global) are pulling back on capacity, squeezing organizations to pay higher premiums for less protection. 

Ideally, losses would be prevented in the first place. Yet suppliers and suppliers' suppliers are hard to assess. How solid are their businesses? How resilient? What economic, natural-hazard and logistical risks do they face? What provisions have been made for backup suppliers? Where does one find answers? How much due diligence is reasonable and cost-effective?

FM Global offers end-to-end supply chain coverage

FM Global helps clients address these concerns, enabling the insurer to offer greater contingent business interruption capacity and ease the squeeze.

Supply Chain Solution, available through the FM Global Advantage policy, consists of data-driven risk assessments and research-backed engineering advice personalized to a client's supplier locations – as well as those of its suppliers' suppliers. The Supply Chain Impact Analysis examines a client’s business model, finances and engineering risks to understand financial exposure to disruptions anywhere in the supply chain. This analysis helps businesses better manage risks through smart decisions about insurance, capital investment, partnerships, contingency planning and new facilities.

FM Global's Contingent Time Element Extended (CTEE) coverage uniquely covers the entire supply chain, helping to keep business interruption to a minimum, no matter where in the world a company operates, or how indirect the connection is to a loss. It’s the only contingent time element coverage that extends, without limit to the length of the supply chain, beyond direct suppliers and customers.

Furthermore, FM Global' Logistics Extra Cost product similarly covers breaks in the distribution chain. Shipments can be rerouted quickly, and with the confidence that any extra costs have a place in the FM Global Advantage policy. Logistics Extra Cost is an innovative coverage that pays for extra costs to reroute a shipment if there’s damage to a transportation system – even if the goods shipped are insured by another company.

Supply chains have always involved risk. Yet the world seems to find itself in a particularly risky time right now. If you’d like to discuss new ways to protect your supply chain, your business and the overall value you bring to your customers, an FM Global client service team can help.

Learn about FM Global’s Supply Chain Business Interruption Coverage

Related resources:

Protect Complex Supply Chains from the Changing Climate

6 Key Facets of Current Global Supply Chain Strain

Parkdale, Inc: Answering the call

Special Report: Supply Chains