Supply Chain Brain
Avoiding Pitfalls of a Contingent
Business Interruption Loss
Recording of this session via any media type is strictly prohibited.
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Speakers
• Frank Huyberts, Manager - Claims Administration,
General Motors
• Allen Melton, Partner, Americas Leader - Insurance
Claims Services, EY
• Brad McCloskey, Senior Manager - Insurance Claims
Services, EY
Recording of this session via any media type is strictly prohibited.
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What to Expect
After attending this session you should know
how to assess supplier risk, proactively manage
supply chain risk, and understand coverage and
documentation requirements to support a
contingent business interruption loss.
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Pitfalls to Avoid
• Lacking knowledge and/or visibility on the complete
supply chain
• Not having full understanding of CBI coverage and its
application
• Assuming systems are set up to capture or maintain
documentation that will be needed to support CBI
loss
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Assess Supplier Risk
• Number of suppliers
o How well do you know and understand your Tier 1 and/or Tier II
suppliers
• Risk profile of key suppliers and potential loss
scenarios
• Specialization of items supplied
• Geographic dispersion of suppliers
• Ability to resource parts within a supplier’s own
network
• Supplier capacity utilization – available excess
capacity
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Manage Supply Chain Risk
• Proactively identify potential risks and loss scenarios
• Monitor key supplier business continuity planning
process – test it
• Build in redundancy to suppliers or within a supplier
o Time needed to qualify new suppliers
• Increased inventory of key components
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Transfer Supply Chain Risk
• Contingent business interruption / dependent time element
insurance
• Supplier contracts – insurance / liability
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Contingent Business Interruption
Insurance Coverage
• Usually part of a broader property policy
• Typically provides coverage for the interruption or suspension
of an insured’s business operations as a result of physical loss
or damage to the property of a supplier, customer, etc.
o
o
Physical damage
Covered perils / All risk
• Potential coverage for multiple tiers of supply chain
disruption
o
o
o
Direct v. indirect suppliers and/or customers
Named v. unnamed suppliers and/or customers
Tier 1, Tier 2, etc.
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Contingent Business Interruption
Insurance Coverage (cont’d)
• Understand applicable sublimits and deductibles
o Different sublimits and deductibles may apply for different tiers and
locations
• Typically provides coverage for both business interruption and
extra expense
• Coverage issues
o Concurrent causation
o Lack of information from suppliers
o When to give notice to insurers
o Maintaining privilege during coverage investigation
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Fact Pattern
• Snack maker that sells product through grocery
stores and convenience stores
• Hurricane causes extensive widespread damage to
multiple states where you sell your product
• Several hundred stores are impacted
• Policy only covers CBI losses as a result of physical
damage
o Stores were impacted by flood damage, wind damage,
service interruption and civil authority
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Measurement and Documentation
Challenges
• Measurement issues
o Allocation of losses by causation
o Indemnity periods
o Wind vs flood
• Documentation issues
o Systems do not align or provide level of detail being requested to
support the loss
o Lack of information from suppliers
o Historical data not maintained
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Storm Surge Mapping Software
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Questions, Final Comments and
Contact Information
• Frank Huyberts - frank.huyberts@gm.com
• Allen Melton – allen.melton@ey.com
• Brad McCloskey – brad.mccloskey@ey.com
Recording of this session via any media type is strictly prohibited.
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EVALUATION INFORMATION /
MOBILE APP
Please complete the session survey on the RIMS14 mobile application.
Recording of this session via any media type is strictly prohibited.
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