Businesses are fighting hard to withstand the effects of natural and man-made disasters and the significant disruptions both can have on supply chains.
Over the past two years, we have weathered an earthquake, tsunami and nuclear disaster in Japan that caused serious disruptions to the automotive and other industries; floods in Thailand that had an unexpectedly profound impact on various multinational industries; and Hurricane Sandy, which literally shut down much of the Northeast U.S. for days, if not weeks. Because disasters like these seem to be happening more frequently, now is the time for the insurance industry to focus on modeling contingent business interruption (CBI) risks, as the market need for CBI insurance is sure to grow.
Over the past 20 years, natural catastrophe models have evolved and become institutionalized across the insurance industry. As a result, both insurance companies and their insureds have had the benefit of risk models to guide decision-making on properties at-risk for nat cats, such as hurricanes, earthquakes and tornadoes. However, there is currently a limited amount of insurance available to cover this risk.
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