Hurricane Matthew + Supply Chain Disruption = Captive Insurance Company

     If you’d like to learn more about how a captive insurance company could insure your company’s supply chain or other risks, please call as at 832.330.4101.   
   
  Investopedia defines a supply chain as “a network between a company and its suppliers to produce and distribute a specific product.”  Merriam Webster defines “disruption” as “causing (something) to be unable to continue in the normal way: to interrupt the normal progress or activity of (something).”  Therefore, a “supply chain disruption” is an “interruption of a specific distribution network.”
  
  Thanks to Hurricane Matthew, which is currently off the U.S. east coast, any north east company that relies on Atlantic Coast shipping is experiencing a “supply chain disruption,” an event that could potentially delay projects and eventually cost the company a great deal of money. 
   
   To get a better idea of the nature of this problem, consider the 5 top 2014 disruptions:

1. Typhoon Halong, south east Asia ($10+ billion, 41 weeks)
2. Severe flooding, Long Island, New York, US ($4+ billion, 38 weeks)
3. Typhoon Rammasun, south east Asia ($1.5+ billion, 38 weeks)
4. Gas explosions, Kaoshing, Taiwan ($900+ million, 26 weeks)
5. Hazardous chemical spill, Arizona, US ($900+ million, 10 weeks) 

The shortest duration of impact was 10 weeks.  But that was for a geographically contained area: Arizona.  Weather events -- such as a typhoon or hurricane -- can caused problems for 8 months.  And the overall damage can be in the billions of dollars.  Think about the potential impact of this loss on your business’ bottom line; it could probably bankrupt a business that wasn’t insured. 

     This is a classic example of a stochastic (low frequency, high payout) risk.  These risks are best handled by a captive.  If you’d like to learn more about how a captive could insure this or other risks your business faces, please call me at 832.330.4101.