Insurance Can Reduce the Financial Repercussions to Your Supply Chain of Superstorms, Wildfires, Climate Change, and Global Economic Disruptions

Policyholder Informer

Many companies in today’s global economy are dependent upon the efficient and disruption-free operation of their multinational supply chains. Unfortunately, such supply chains are vulnerable to numerous physical and non-physical elements, including natural disasters, information technology failures, cyberattacks, pandemics, climate change, and civil and political unrest. These vulnerabilities can, and often do, result in the disruption of business operations resulting in significant financial losses.

Hurricanes Irma and Maria in Puerto Rico are an example of how a natural disaster can significantly impact the supply chain within a single industry causing substantial losses. Puerto Rico is vital to the medical device industry. According to the Food and Drug Administration, Puerto Rico has more than 50 medical device manufacturing plants, which “manufacture more than 1,000 different kinds of medical devices,” including surgical instruments, dental products, and “highly complex devices such as cardiac pacemakers and insulin pumps.” Some of the manufacturers are the sole manufacturer of a certain medical device. The aftermath of Hurricanes Irma and Maria—the lack of power, connectivity, transportation, and clean water—has caused manufacturers to be unable to return to pre-hurricane production levels, even months later resulting in significant financial losses. For example, one medical device company with four plants in Puerto Rico is expected to suffer an estimated $55 to $65 million dollar loss alone.

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