Top Issues of 2013: Risk Management, Strategy and Operations — Report
Top Issue: Risk Management/Contingent Business Interruption
Recent events have shown the potential for catastrophes to interrupt business supply chains. PwC cites the volcanic eruption in Iceland in 2010, which caused an estimated $2 billion in business interruption losses related to the disruption of air travel. The 2011 earthquake, tsunami and nuclear disaster in Japan caused an estimated $5 billion in global business interruption losses. Coverage for such contingent business interruption (CBI) is very limited, largely because the dynamics of global CBI risk remain poorly understood, according to PwC.
“The challenge for industry is that no one entity has a really good handle on what is now a global supply chain,” comments Anand Rao, a partner in PwC’s U.S. Insurance Advisory Services. “Large manufacturing companies, for example, rely on often complex and extensive global supply chains. Insurers have traditionally left aside a large chunk of such risks as too difficult to underwrite.”
Bigger insurers are beginning to get a handle on the problem, using big data to gather a sufficient amount of relevant data in a timely fashion, according to Rao. “It requires a great deal of work to understand what regions of the world produce certain kinds of products,” he says. “Global supply chain means greater vulnerability related to the risk exposure of different industries in various geographies.”
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio
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