Group 8

Parametric Insurance Case Study: Supply Chain Disruption

Client Need: A major vendor of heavy construction equipment imports hundreds of machines per month from an Asia based supplier. These top brand imports are expensive and large in size, requiring a strictly timed delivery schedule to ensure that sufficient product is available to meet market demand.

Pain Point: The client had experienced repeated operational disruption after a series of earthquakes and typhoons stressed the client’s dependence on their Asia based supplier. A recent typhoon resulted in revenue losses of 2M USD, though the client’s exposure could amount to 15M USD in a worst case scenario. The lengthy claims assessment process of traditional products did not meet their liquidity needs and the client had no way to recover losses from missed customers during supply disruption.  

Our Solution: Utilizing data on the severity and location of typhoon or earthquake events provided by regional specialized meteorological centers, our team built a parametric cover based on event detection in a pre-agreed perimeter around key suppliers selected by the client. In consultation with the broker, we calibrated the cover using the client’s historical loss data and assigned specific payout ratios based on the event severity and distance from identified supplier factory sites.

The Result: When a typhoon occurred and triggered the policy, the client immediately received cash to trigger their Business Continuity Plan. With zero time spent in lengthy loss adjustment discussions around complex supply chain processes, the client’s Risk Management could focus fully on ensuring business continuity and continued suppliers relationship.

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