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Semiconductors: How you can manage supply chain risk for adequate contingent business interruption coverage

Supply chains in Asia are impacted by shifting trade policies and extreme weather. How can semiconductors get adequate contingent business interruption insurance?

Escalating trade tensions, extreme weather, and changing regulations have significantly disrupted supply chains in Asia. The lack of clear visibility in these supply chains has made it increasingly difficult for semiconductor companies to secure adequate contingent business interruption (CBI) coverage. 

CBI coverage is essential for the semiconductor industry in Asia as it protects chipmakers from financial losses due to interruptions in their suppliers’ operations, such as physical loss, damage, or destruction of property by those related to them in the flow of commerce. The insurance can also be extended to cover your suppliers’ suppliers (indirect or second-tier suppliers). 

However, obtaining adequate CBI is difficult if visibility barriers exist within supply chain processes between company silos, applications, suppliers, and customers.   

How a prominent semiconductor in Hong Kong solved challenges in obtaining CBI coverage

A leading frame manufacturer needed higher CBI coverage to navigate risks in its vast supply chain network

Historically, the company has faced challenges in securing CBI within its property damage business interruption (PDBI) policy in Hong Kong due to frequent supply chain disruption risks and limited visibility of its supply chain network. 

Why is managing supply chain risks in Asia getting harder?

With supply chain disruptions becoming more frequent, insurers and regulators alike are requiring businesses to improve their supply chain risk management. But the following challenges remain:

  • Lack of or limited visibility of risk exposures beyond direct suppliers.
  • Constant disruption from events such as changing climate causing downtime and losses.
  • Limited and decreasing supply chain insurance coverage due to limited or low-quality information on key suppliers.
  • Growing pressure from regulators, investors, and customers demanding standards and compliance to be placed on suppliers.

Despite these challenges, the semiconductor industry can leverage technology to effectively map supply chains to identify and quantify risks effectively.

Leverage Sentrisk to map complex supply chain risks and increase CBI coverage

Sentrisk offers a systematic approach to supply chain risk diagnostics. It helps to enhance supply chain visibility for insurers, facilitating better coverage options for chipmakers with the following capabilities:

  • Validation of existing supplier sites.
  • Identification of additional direct supplier production sites and upstream relationships.
  • Significantly expand and enrich information about each site to create a robust submission file.

Marsh’s approach

To address the client's challenges, Marsh utilised Sentrisk to conduct a diagnostic review of the current supply chain, identifying major risks across several key themes:

  • Concentration risk: Assessing if key suppliers or upstream partners are concentrated in a limited geographic area.
  • Bottleneck risk: Evaluating whether certain trade flows are reliant on one or a few suppliers.
  • Geopolitical risk: Analysing the potential for sanctions or other geopolitical factors that may impact the client’s suppliers.

Outcome

Sentrisk provided a holistic overview and transparency of the company’s supply chain network. Marsh then quantified the financial impact of identified risks and made recommendations. As a result of the diagnostic report, Marsh was able to help place a 50% improvement in CBI coverage for the company upon renewal.  

Why Marsh

We serve over 75% of the world’s leading semiconductor companies and 80% of the largest cloud service and data centre providers. Marsh is a trusted partner with unmatched semiconductor expertise backed by comprehensive risk consulting and broking services, multinational support, and claims advocacy.

Start gaining real-time visibility of your supply chain map for better coverage

Get in touch with us today for a free demo of Sentrisk

Our People

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Larry Liu

Communications, Media, and Technology (CMT) Industry Leader, Marsh Asia

  • China