Insurer Swiss Re predicts major supply chain shift, with reshoring and resilience measures generating new demand

Focus for supply chains on moving their supply chains closer to end market and restructuring for more resilience will create new demands, including in the insurance sector

Fundamental restructuring to global supply chains due to the disruption of the flow of goods caused by recent lockdowns is predicted in the latest Swiss Re Institute sigma study.

Businesses and governments have both become acutely aware of impact disruption in today’s complex global supply chains, which could lead to additional global premiums of around $53 billion over the next five years, according to Swiss Re. This includes a one-time boost of $1.2 billion from increased demand for engineering covers during the construction phase of manufacturing facilities and associated infrastructure, and $9 billion for commercial insurance in the operational phase of such facilities.

Supply chain restructuring is expected to generate new demand for risk protection covers and provide opportunities for the insurance industry to underpin global economic resilience. Losses resulting from incidents at suppliers can be compensated for by supply chain, contingent business interruption and non-physical damage cover.

Greater transparency in supply chain flows will make the risk of business disruption more insurable.

The report says the insurance industry is extending its digital technology capabilities to improve its use of data, structured or unstructured.

Firms are expected to create parallel supply chains as they diversify their manufacturing presence across different locations, alongside existing operations.  Government responses across the world to the Covid pandemic have shown how international cooperation can be halted as countries seek to prioritise their domestic agenda. 

The report sees Southeast Asia as the likely preferred destination as new host locations because of their growth potential and competitive labour costs. Swiss Re estimates that gross domestic product growth in alternative host markets for production processes will be boosted annually by 0.7%. Growth is expected to increase by 2.0% annually in the re-shore markets, according to Swiss Re.

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