Supply Chain Brain

1. Supply Chain Brain Avoiding Pitfalls of a Contingent Business Interruption Loss

2. 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

3. 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.

4. 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

5. Assess Supplier Risk • Number of suppliers • 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

6. 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 • Time needed to qualify new suppliers • Increased inventory of key components

7. Transfer Supply Chain Risk • Contingent business interruption / dependent time element insurance • Supplier contracts – insurance / liability

8. 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. • Physical damage • Covered perils / All risk • Potential coverage for multiple tiers of supply chain disruption • Direct v. indirect suppliers and/or customers • Named v. unnamed suppliers and/or customers • Tier 1, Tier 2, etc.

9. Contingent Business Interruption Insurance Coverage (cont’d) • Understand applicable sublimits and deductibles • Different sublimits and deductibles may apply for different tiers and locations • Typically provides coverage for both business interruption and extra expense • Coverage issues • Concurrent causation • Lack of information from suppliers • When to give notice to insurers • Maintaining privilege during coverage investigation

10. Fact Pattern • Snack maker that sells product throughgrocery 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 • Stores were impacted by flood damage, wind damage, service interruption and civil authority

11. Measurement and Documentation Challenges • Measurement issues • Allocation of losses by causation • Indemnity periods • Wind vs flood • Documentation issues • Systems do not align or provide level of detail being requested to support the loss • Lack of information from suppliers • Historical data not maintained

12. Storm Surge Mapping Software

13. Questions, Final Comments and Contact Information • Frank Huyberts - frank.huyberts@gm.com • Allen Melton – allen.melton@ey.com • Brad McCloskey – brad.mccloskey@ey.com

14. EVALUATION INFORMATION / MOBILE APP Please complete the session survey on the RIMS14 mobile application.