Extreme weather events disrupt global supply chains
Source: Middle East Insurance Review | Jan 2024
A new whitepaper published by Gallagher Re reveals that over 50% of businesses have experienced disruptions in their production networks due to extreme weather events, highlighting the fragility of global supply chains.
The 10-page whitepaper, The Weakest Link? The Impact of Climate Change on Supply Chains, explores the multifaceted risks, from catastrophic to chronic impacts and proposes strategies for businesses and governments to navigate the challenges posed by climate change.
The paper said, “While the changing nature of extreme events under global warming is difficult to predict, insurance insights are crucial for effectively managing risk. The broader systemic vulnerabilities of the global economy are evident in disruptions caused by unrelated events such as COVID-19 and war, underscoring the need for comprehensive risk management strategies.
It said the chronic impacts of climate change, such as rising temperatures and sea levels, pose ongoing risks to supply chains, affecting costs and compounding challenges for renewable-energy industries. Businesses can address climate-related concerns through deep mapping and risk analysis, using insurance industry risk modelers to enhance resilience.
It also suggests that innovative insurance solutions, including parametric products, offer effective risk pricing and favourable business interruption cover terms to address evolving extreme events.