Supply Chain Insurance: Protecting Against the Unexpected

Here is a number that should give every manufacturer and commercial real estate operator pause: 86% of companies suffered supply chain losses in the past year, yet barely one in three were fully covered for those losses. That data point comes from Gallagher's 2026 Redrawing Global Supply Chains report, and it captures the central problem I see across the businesses I work with. Supply chain risk awareness has never been higher. Actual financial protection has not kept pace.

The reasons are not hard to find. Tariff volatility, geopolitical instability, extreme weather, cyber incidents, and the cascading failures of just-in-time inventory models have combined to make supply chain disruption one of the most consequential exposures on a manufacturer's risk profile. According to Allianz's 2026 Risk Barometer, only 3% of companies consider their supply chains "very resilient." And the Thomson Reuters Global Trade Report found that supply chain management has emerged as the dominant strategic priority for 68% of trade professionals -- nearly double the 35% who cited it as a top concern just one year ago.

The insurance market has products designed for exactly this exposure. The problem is that most manufacturers are either unaware of what is available, or they are running outdated programs that were not designed for the supply chains they actually operate today.

The Coverage Gap Is Real -- and Expensive

Most commercial property and business interruption policies cover your own physical losses. If your facility burns down, your property insurer pays for the building and covers your lost income during the rebuild. What they typically do not cover -- or cover only in limited amounts -- is what happens when someone else's facility burns down and that disruption ripples through to you.

That is the exposure contingent business interruption (CBI) insurance is designed to address. CBI pays when your operations are disrupted because of a loss at a supplier, customer, or other third party in your supply chain. In theory, most commercial property policies include some CBI language. In practice, the coverage is often severely sub-limited, riddled with exclusions for unnamed suppliers, and structured around physical damage triggers that exclude the scenarios -- port congestion, geopolitical disruption, cyber incidents -- that actually drive most supply chain losses today.

The Allianz claims data illustrates the real cost. Following events like the 2021 Texas deep freeze and the semiconductor supply disruptions of recent years, CBI claims spiked dramatically -- with the number of claims in a single period exceeding those of the prior three years combined. The average business interruption claim from property losses now exceeds $4 million. For supply chain disruptions that affect multiple facilities and last months rather than weeks, the losses can run far higher.

What a Modern Supply Chain Risk Program Looks Like

The traditional approach to supply chain insurance was essentially a checkbox: add some CBI coverage to your property program, pick a sublimit that felt reasonable, and move on. That approach fails in 2026. The businesses that handle supply chain disruptions best -- financially speaking -- are the ones that have invested in understanding their actual exposures before a loss event occurs.

That starts with mapping. Most companies have limited or no visibility beyond their direct (tier-one) suppliers. Aon's research found that six in ten companies report limited or no visibility beyond their direct suppliers. But the losses that hurt most often originate at tier-two or tier-three suppliers -- the single-source component manufacturer three steps removed from your operation that you did not know was a chokepoint until it went offline. Only 11% of organizations have evaluated risk financing and transfer solutions for supply chain disruption, according to Aon's 2025 Global Risk Management Survey. That is a staggering number given the stakes.

Once you understand your supply chain's actual structure and vulnerabilities, a well-designed insurance program can include several layers of protection:

• Broadened CBI coverage that explicitly names critical suppliers and customers -- or uses "unnamed" or "blanket" language with meaningful limits, not sub-limits of $250,000 that bear no relationship to actual exposure.
• Non-physical damage triggers that extend coverage to events like government-ordered shutdowns, port closures, and infrastructure failures -- not just fires and floods at supplier facilities.
• Parametric insurance for specific, measurable triggers like port closure durations, weather events, or geopolitical index thresholds. Parametric pays quickly based on a defined event, without requiring a lengthy loss adjustment process -- critical when cash flow matters most.
• Trade disruption insurance that covers losses from tariff changes, sanctions, import/export restrictions, and political risk events that strand goods, disrupt shipments, or render contracts unenforceable.
• Cargo and stock throughput coverage structured to reflect current inventory values -- particularly important given that nine in ten businesses are now stockpiling goods in response to tariff uncertainty, dramatically increasing their aggregated inventory exposure in warehouses and ports.
• Credit and supplier insolvency coverage that protects against financial loss if a key supplier becomes insolvent and cannot deliver -- an exposure the Aon analysis specifically flags as inadequately addressed by traditional products.

Why the Stockpiling Trend Creates New Risks

One consequence of tariff volatility that I am watching closely is the surge in inventory stockpiling. Gallagher's report found that nine in ten businesses are stockpiling goods or actively considering it as a buffer against supply bottlenecks and new tariffs. That is a rational operational response. It is also an underappreciated insurance exposure.

When you concentrate higher volumes of goods and materials in warehouses -- particularly at ports and industrial parks -- you are creating a larger target for natural catastrophes, fire, cargo theft, and flood. A quarter of businesses surveyed said they are aware of this risk but not prepared for it. The cargo and property coverage that was adequate for your normal inventory levels may be materially inadequate for the inflated stockpiles many manufacturers are now carrying.

This is the kind of shift that needs to trigger a conversation with your broker -- not a renewal conversation a year from now, but a conversation now, before you have accumulated value that your current program was never designed to protect.

The Bottom Line

Supply chain risk is no longer a logistics problem. It is an enterprise risk management problem, and it belongs in your insurance program as a first-class exposure -- not a footnote in your property policy's CBI sublimit. The data is unambiguous: most manufacturers are underinsured for supply chain disruption, and the cost of that gap is increasingly visible in claim outcomes.

The good news is that the insurance market has evolved. Products exist today -- parametric covers, trade disruption policies, broadened CBI structures, captive solutions -- that were not widely available five years ago. The challenge is assembling a program that actually fits your supply chain rather than a generic template that was designed for a world that no longer exists.