Business interruption is a worry for firms in Asia

Corporates and insurers in Asia are increasingly concerned about business interruption (BI) and contingent BI risks, especially in the context of some specific geopolitical tensions such as between the US and China. Taiwan, a crucial player in global semiconductor production, is also a concern in the context of tensions with China and its exposure to natural disasters.

That is the perspective of Suki Basi, managing director and founder of Russell Group. He is partly informed by outcomes stemming from Russell Group’s Corporate Working Group, which comprises around 30 corporate risk managers and participants from insurance and reinsurance markets. This group serves as a platform for exchanging insights that affect various business models, helping to identify connected risks and emerging threats.

Basi highlighted the potential global ramifications of disruptions in Taiwan, as discussed at a parametric conference in London. “Experts examined how a natural disaster, such as a significant earthquake damaging semiconductor manufacturing facilities, could trigger widespread ripple effects across various industries.

“Car makers worldwide are heavily dependent on semiconductors for their vehicles. Understanding these interconnected risks is crucial for effectively navigating potential disruptions in global supply chains,” he told SIRC Today.

The US Presidential election could have repercussions for global trade. At the time of writing before the election on November 5, Republican candidate Donald Trump has suggested that he would impose substantial tariffs on goods imported from countries including China and from Europe.

“We aim to make transportation and commodity data more transparent.”

Basi warned that such measures could provoke retaliatory actions, further straining global supply chains. “Insurers and underwriters must be prepared to track these changes and analyse the underlying data across shipping, overland transportation, and air freight,” he stated.

Russell Group has focused on the “transportation layer” within global supply chains, modelling commodity flows by sea, land, and air. This allows it to track goods movement and anticipate evolving dynamics in trade routes.

Transparency and collaboration

A central goal for Russell Group is managing BI risks, particularly contingent BI. “We aim to make transportation and commodity data more transparent, providing all stakeholders with a clearer view of potential exposures,” said Basi.

A key part of this has been access to real-time data, which has been invaluable for clients in assessing their asset portfolios and enhancing capital allocation. This capability allows effective monitoring of peak accumulation exposures and aggregation of risks. By comprehensively understanding their portfolios’ dynamics, clients can strategically decide when and where to underwrite additional risks, thereby enhancing profitability and supporting sustainable underwriting practices.

Russell Group highlights the need for modern organisations to embrace sustainability. “We have defined sustainability as integrating future thinking, threat intelligence, and scenario planning into their risk management culture,” Basi explained.

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