1. Is it possible to insure my Supply Chain?
Wm. Randall Hampton, CPCU, ARM, AAI
Executive Vice President / PARTNER

2. The SIMPLE ANSWER
YES

3. TRADE Disruption Insurance / Supply chain interruption insurance
STOCK THROUGHPUT
TRADE Disruption Insurance / Supply chain interruption insurance

4. What is Stock Throughput?
Comprehensive all-risks coverage for an insureds goods commencing the moment they assume responsibility until their interest ceases.
Coverage is provided for raw materials, work in progress and finished products on a global basis.
Full ‘All Risks’ conditions for global storage and transit exposures.

5. What is Stock Throughput?
Seamless worldwide coverage through the insured’s supply chain
$750,000,000 of available capacity with top rated insurance carriers.
Policy application on a Primary and Excess basis.

6. What is Stock Throughput?
PIGS TO WEENIES COVERAGE!

7. Target Classes Any Manufacturer, Wholesaler, Logistics Companies
Distributors, Logistics companies – Importers/Exporters
Manufacturers
Chemical, Oil and Gas Industries
Major Retail Companies
High Tech, Bio Tech and Pharma Industries
Agricultural

8. Advantages of Stock Throughput Coverage
Seamless Worldwide coverage through the insured’s supply chain
Ocean cargo, inland transit and stock/inventory all under one policy
Elimination of potential gaps between multiple policies
Full ‘All Risks’ conditions for global storage and transit exposures.
Coverage includes Windstorm, Flood and Earthquake

9. Advantages of Stock Throughput Coverage
High limits and lower deductibles
No percentage deductibles for catastrophic exposures
Selling price basis of valuation provides an element of business interruption coverage
Ease of administration through premium rating against sales turnover

10. Advantages of Stock Throughput Coverage
Reduces the need for time consuming declarations
Premium Savings
Combining of risks under one policy generates economies of scale
Competitive rates for CAT coverage for industry sectors and complex businesses

11. Pitfalls of Stock Throughput Coverage
Real and Personal Property
Coordination of Deductibles
Extended Business Interruption from Stock only loss
Property Premium Credit

12. Pitfalls of Stock Throughput Coverage
Local Admitted Coverages
OFAC
Ingress / Egress

13. Underwriting Considerations
Submission
Application
SOV with COPE
5 years Loss Information
Maximum versus Average Values
Values in Storage vs Transit

14. Underwriting Considerations
Cat Perils
Valuation of Goods
Underwriting Matrix

15. Available Coverage Extensions
Delay in Start Up
Consequential Damages
No loss Credits

16. Case Study Overview of ABC Chemical Company
$50,000,000 Manufacturer of Chemicals
Three Locations in US
Source raw materials in Asia
Worldwide Sales
Good Loss Experience
Some Cat Exposure
Currently a 2% Wind and 5% Earthquake Deductible
Written by Standard Carrier

17. Case Study Values Transit Inventory
Average $200,000 – Maximum $1,000,000
Domestic Primary Imports $0 – International Primary Imports $20,000,000
Domestic Contingent Imports $0 – International Contingent Imports $20,000,000
Domestic Primary Exports $30,000,00 – International Primary Exports $15,000,000
Domestic Contingent Exports $3,000,000 – International Contingent Exports $2,000,000
Inventory
Average Inventory $37,100,000 – Maximum Inventory $20,000,000

18. Maximum Inventory Value Average Inventory Value
Case Study
Address
Maximum Inventory Value
Average Inventory Value
123 Main St
20,000,000
14,000,000
234 Main St
15,000,000
10,500,000
456 Main St
18,000,000
12,600,000
Total
53,000,000
37,100,000
Storage
Rate
Premium
0.1500%
55,650.00
EPI
74,650.00
M&D
Total Sales:
50,000,000
Adjustable Rate:
0.1493%
International Transits
Domestic Transits
Imports
Incoming
Primary -
20,000,000.00 -
0.030%
6,000.00
Contingent -
0.010%
2,000.00
Exports
Outgoing
15,000,000.00
30,000,000.00
4,500.00
0.020%
2,000,000.00
3,000,000.00
200.00
300.00
Total Premium
12,700
6,300

19. What IS Supply chain interruption insurance?
A policy of indemnity to cover the financial consequential losses arising from a delay to or non delivery of goods and services
Indemnity can be loss of profit, extra expenses and/or contractual penalties
Can provide coverage to any party with a financial interest in the performance of a supply chain – buyers, sellers, third parties
Unlike STP does NOT provide physical loss or damage cover

20. What IS Supply chain interruption insurance?
Policy designed to suit business needs
Named perils or All Risks
All Risks – broad approach for large corporations with resources to manage required data. Exclusions apply.
Named perils – allow managed approach to risk:
Breakdown of conveyances
Blockage to roads, railways, ports, waterways
Political risks including embargo
Ash clouds

21. History of Supply chain interruption insurance
Lloyd’s of London began offering Trade Disruption Insurance in the 1980s
Delay in delivery is a standard exclusion from cargo / transit policies
Supply Chains were suddenly becoming very international and complex
There was a need for a policy to cover the business interruption resulting from a break in a supply chain
Marine market in London provided the innovative first policy forms on a Named Peril basis
Trade Disruption Insurance now know as Supply Chain Interruption (SCI) Insurance

22. Advantages Business risk as identified in 10K can be addressed
Protects profitability
Premium spend managed against indemnity and perils selected
“Captive friendly” financial tool – quota share placements
Specific to identified business risk – can be used for single or part supply chains
Broad range of optional perils
Enhances Property and Marine policies

23. Considerations Identifying risk and specific supply chain
Supply Chain mapping
Risk Management – risk identification, prevention and contingency planning
Indemnity calculation
Cost benefit analysis

24. Underwriting Considerations
Underwriters will assess the risks in relation to the perceived perils and rate for each peril
Multiple perils and larger risks will attract savings for composite policies
Sharing risk – underwriters will expect a quota share retention or significant deductible (this can also be used by the insured for premium spend management and Captive usage)
Quick indications can be obtained using general and public information

25. Case Study – Clothing Retailer
Supply Chain:
80% of clothing sourced in China
Risks:
High dependency on one country source
Distance of physical supply routes to market
Just in time delivery requirements for fashions
Perils:
Political intervention – embargo, confiscation
Physical damage to vessels, waterways and port facilities
Indemnity:
Loss of profit
Extra Expenses

26. Case Study – Clothing Retailer
Risk Management and Contingency Planning:
Alternative sources with pre- determined contracts for capacity
Logistics management plan to re- route
Loss:
China closed all ports after Tiananmen Square riots
Mitigation and Recovery:
Charter of freight aircraft to fly instead of ship goods
Claim:
Extra expenses to switch logistics from sea to air freight paid

27. Risk =

28. Questions?

29. Wm. Randall Hampton CPCU, ARM, AAI
Randy Hampton is a partner with Axon Underwriting bringing 25 years of diverse insurance brokerage experience.
Randy specializes in difficult placements which require unique solutions. He takes a holistic view of risk, looking at it enterprise-wide through his broad experience in the design and management of complex property and casualty placements by focusing on loss sensitive and alternative risk financing programs.
Randy’s professional experience includes 14 years as a Senior Vice President for McGriff, Seibels & Williams, Inc. where his responsibilities included marketing and servicing of large national and multi-national risk management clients. In addition, Randy served as McGriff’s Staffing and Security Co-Focus Leader.
Randy began his career with Willis of Georgia as Director of Marketing overseeing carrier relationships and program marketing. After three years, he was promoted to Senior Vice President with his responsibilities transitioning to the procurement and servicing of clients. During this time he was involved in the production of over $2,400,000 in annual revenue.
He is a proud graduate of the University of Georgia with a degree in Risk Management and Insurance