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:
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.