The scale of the supply chain threat to the international automotive sector is immense as proven by a number of high-profile events in recent times. It seems that the industry itself has created a global production and distribution structure that is remarkably vulnerable. Global insurance broker, JLT Specialty (JLT) has invested considerable time and effort into identifying the core risks facing this sector and how they could more effectively be mitigated and transferred. JLT teamed up with Commercial Risk Europe to host a roundtable discussion with leading risk managers from the automotive sector to identify the key issues.
The automotive industry was the most disrupted sector in 2017 as the number of disruption events leapt by 30% from just over 1,300 events in 2016 to nearly 1,700 events in 2017, according to recent analysis carried out by JLT and Resilinc, a supply chain analytics and resiliency company. The core problem is that the global automotive sector is dependent upon a highly complex and global supply chain system that is relied upon to deliver thousands of parts per vehicle. Disruption to the delivery of just one obscure element of these parts has the potential to halt entire production lines and sometimes across the entire sector as in some cases all motor manufacturers are reliant on one core supplier or even single plant.
Global disruption events impacting automotive industry
So, what about insurance? Is this a risk that can also be cost-effectively transferred or is it just too complex and difficult to identify and quantify? The JLT analysis found that, perhaps not surprisingly, about half of all organisations are not insured against supply chain risk at all. The bottom line is that covering every risk, everywhere, is just not practical and prioritising what to cover can be “immensely challenging” concludes the broker. But that does not mean that insurance is irrelevant in this area and should not be looked at carefully. Companies in the auto sector do have existing cover for elements of their supply chain risk and bespoke solutions are available. JLT argues that given the huge scale of exposure that the industry faces it is more important than ever to seek policies that cover the most business critical areas and, at the same time, avoid duplications and gaps.
This is why JLT has partnered with Resilinc as it enables the broker to add cutting edge supply chain analytics into its insurance solution.
Matthew Grimwade, Head of Automotive, JLT Specialty “It’s all about quality data: greater transparency along the supply chain can help set auto businesses apart from their rivals. The broader and deeper that knowledge, the better auto manufacturers can mitigate risk and be agile in their response to events - and the more favourably they will be viewed by insurers.”
All of this leads to the inevitable conclusion that all parties in the chain – risk managers, brokers, insurers and support professionals – need to work together more closely to more effectively identify, measure, mitigate, manage and transfer this risk.
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For further information please contact Matt Grimwade, Head of Global Automotive on +44 (0)203 797 7734