Cascading events, from geopolitical upheaval to natural disasters, are redrawing global supply chains. As risks continue to evolve, Gallagher's latest global study reveals that businesses are under increasing pressure to strengthen supply chain protection.

Key insights

  • 86% of businesses report that they have experienced a supply chain loss in the past year. Of those, 68% said that they were only partially insured or entirely uninsured.
  • Business leaders see challenges with current insurance offerings, including limited options, high premiums and coverage gaps. They indicate a clear business need for access to better data and analytics, more flexible insurance products and tailored risk assessment.
  • Over half of businesses say supply chain complexity prevents them from identifying their own risks. Visibility beyond Tier 1 suppliers is rare.
  • Products and solutions — such as contingent business interruption, trade credit and trade disruption insurance — can help fill coverage gaps.

The widespread impact of supply chain disruption has reached the claims market, Gallagher research shows. 86% of businesses have experienced supply chain losses in the past year — events that could have major implications for their operations and bottom line. Even more notable is this: 68% of these businesses were only partially insured or entirely uninsured for their supply chain losses.

The protection gap reflected in the research spans industry, geography and business size. And as the survey was conducted before the closure of the Strait of Hormuz, these figures likely understate current exposure and growing demand for risk mitigation and insurance solutions.

The danger of being underinsured is compounding. When a major supply chain disruption occurs, its effects cascade across regions and lines of business.

"Chokepoint constraints in the Strait of Hormuz is directly driving up oil and gas costs across the world," explains Mallika Natarajan, head of Analytics Advocacy, Gallagher Re. "The impact of this is primary and secondary including leading to rising costs of petrochemical byproducts such as fertilizers, steel, cement and PVC."

"This feeds inflation and will have a knock-on impact on the cost of goods, which will then drive up the cost of claims — given higher repair costs and consequently higher wages — from natural catastrophe events when they happen," she continues. "It's all interconnected."

Due to rising geopolitical risk and supply chain volatility, many global businesses are shifting their strategy from "just-in-time" efficiencies to "just-in-case" contingencies, increasing preparedness for supply chain disruptions. They are also stockpiling, building buffer inventory and using alternative trade corridors.

These operational shifts also carry insurance implications. Higher buffer inventories change property valuations and business interruption assumptions, and if policies aren't updated to reflect such shifts, the protection gap widens still further.

1 in 4 businesses are not prepared

At least 1 in 4 businesses are not prepared for risks associated with their shifting supply chain strategies such as stockpiling, buffer inventory, and alternative trade.

Yet, there are significant barriers to securing adequate coverage for increasing supply chain exposures. The market lacks dedicated supply chain solutions, in large part because the complexity of global supply chains has made bespoke solutions difficult and expensive to underwrite.

According to 57% of survey respondents, the complexity of their supply chain makes it hard for them to identify areas of weakness or anticipate future disruptions. If a business cannot see its own risk, it cannot insure it — and neither can an underwriter — creating a significant need for this kind of data-driven guidance.

Mapping complex supply chains is a major hurdle to insurability, as most businesses lack full visibility into who their suppliers are and where they are, especially those further upstream. Nearly half of business leaders told Gallagher they lack full visibility into who and where their direct suppliers are, rising to 60% for Tiers 2 and 3.

"If the fallout from COVID taught us nothing, it showed the ripple effect in terms of failure of suppliers can go to second tier, third tier and further, and that can have an impact on clients," says Mike Matthews, commercial director, EMEA and APAC, Artex Risk Solutions. "But there are still industry blind spots, including overconfidence in first tier supplier resilience."

According to Gallagher's research, the high cost of premiums is another key reason why businesses lack adequate supply chain coverage. Additional barriers include difficulty quantifying or proving supply chain risk exposure, limited internal data to support underwriting, and a lack of suitable insurance products in the market.

Risk mitigation, therefore, requires organizations to dig into the offerings available and consider their full set of needs. Yet as the trade environment becomes more volatile and uncertain, supply chain decision-making is getting more difficult. Tariffs, economic conditions and unreliable suppliers are key factors business leaders say are complicating those decisions.

This presents an opportunity for the insurance industry. While some bespoke supply chain solutions exist, organizations say they need more widespread, cost-effective insurance products to truly bridge the supply chain protection gap. To meet this need for manufacturing clients, Gallagher brokers conduct supply chain health and risk management analysis during client onboarding. This includes assessment of critical suppliers, equipment redundancy, and human capital dependencies.

With the aim of improving business continuity and disaster recovery plans, the process helps business leaders fully appreciate both the nature of their exposure and the available options to mitigate these risks.

What businesses want from insurers: Better data, insights and risk financing

To make more confident decisions around risk financing and risk mitigation, businesses say they need more from their insurance and broker partners. Specifically, Gallagher research revealed a clear business need for access to better data and analytics, more flexible insurance products and tailored risk assessment.

Business leaders say they need insurers to provide access to data and analytics to improve risk forecasting and supply chain visibility. The larger companies also need access to clearer guidance as regulatory requirements and sanctions continue to change.

Top issues businesses cite with current insurance providers include limited coverage for supply chain-specific risks, high premiums for comprehensive coverage and coverage gaps for emerging risks (e.g., cyber, climate, geopolitical). While these are valid concerns, there is progress being made toward better solutions to address supply chain risk, which businesses can leverage today.

More data and analytics tools are becoming available, making it easier to track the movement of goods around the world. Supply chain risk modeling is increasingly possible, with new technologies enabling real-time monitoring more common. Additionally, risk transfer products are evolving as modeling improves, but it is an evolution that will continue to develop over time.

"For example, US customs data is freely available to analyze," Alec Russell, managing director, Marine Cargo at Gallagher, explains. "The more that data is made public, the more we can use it. You need that macro dataset to overlay with our clients' data — to show where they sit and what the analysis tells you."

To write the risk, you need to measure it

To better understand continent business interruption (CBI) exposures, Gallagher Re has partnered with the University of Oxford's Environmental Change Institute (ECI) to analyze vulnerabilities in global maritime supply chains. This collaboration examines risks along critical shipping routes and their broader implications. The data is then used to help cedants visualize their CBI vulnerabilities so they can address them.

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What-if scenarios, known as realistic disaster scenarios (RDS), can help break down exposures in meaningful ways.
Mallika Natarajan, head of Analytics Advocacy, Gallagher Re

"Say there is a freeze and a large number of pipes have burst, so you need to order replacements," observes Natarajan. "But the pipes are locked up in a port that has had a fire. So now, you have to ship from China. But tariffs have risen by 20%, adding to the cost… The modeling is easier to communicate when you use a story arc."

"The quality of our data — and the quality of the information we receive — is significantly higher than what we had 15 years ago, leading to clearer decision making for our clients and markets," she adds.

Managing economic risk in the supply chain also calls for specialist data and analytics. And as companies gain access to better risk data, it becomes easier to access more specialist risk transfer solutions. Trade credit products can be a key source of insight and intelligence across all steps of the supply chain, while also offering protection against the insolvency of a critical supplier.

"Credit insurers have realized that the information that can help prevent a loss from happening in the first place is where real additional value can be extracted, and now many are selling credit insurance with information — or alternatively information-only policies without credit risk protection," explains Tim Chance, managing director, Trade Credit at Gallagher.

He notes that demand for trade credit is increasing in line with heightened economic and geopolitical volatility. "Any business that is trading on credit terms with their suppliers has a requirement of this data or this product, there's no question. Historically, construction and manufacturing companies have always been the biggest purchasers of credit insurance, but that has evolved to include transportation due to current levels of economic uncertainty and volatility."

Supply chain insurance needs continue to evolve by sector. In the marine, logistics and transportation industries, new methods of theft have increased demand for cyber and crime insurance solutions. Meanwhile, project delays and material shortages tied to supply chain disruption have increased demand for delay-in-start-up coverage in the construction space.

Alternative risk transfer solutions, such as parametric coverage and captive insurance, can help fill specific supply chain protection needs. They can also provide cover for other sources of non-damage business interruption that are not well catered to by the commercial insurance industry.

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We do a lot of stress testing, to stimulate the impact on a client's operations from the loss of a critical supplier, for instance, and running combined scenarios.
Mike Matthews, commercial director, EMEA and APAC, Artex Risk Solutions

"A lot of clients have recognized that the risks of today may not be matched by the insurance coverage of today," says Matthews. "We use actuarial analysis to stress test operating models and to carry out sensitivity testing to identify where a business interruption loss escalates in a non-linear fashion over time. It helps clients understand which risks are insurable, which are better retained on the balance sheet of the captive, and what resilience investment may deliver a stronger return than risk transfer."

"We use actuarial analysis to stress test operating models and to carry out sensitivity testing to identify where a business interruption loss escalates in a non-linear fashion over time," he continues. "It helps clients understand which risks are insurable, which are better retained on the balance sheet of the captive, and what resilience investment may deliver a stronger return than risk transfer."

Some products have been structured to pay out when drought causes river levels of a major waterway to fall beyond a pre-agreed level, for instance. They provide a lump settlement to compensate for financial losses or to cover increased expenses relating to that specific trade disruption.

Meanwhile, there is a growing interest in trade disruption insurance (TDI). TDI is a specialized coverage which has been difficult and costly to underwrite in the past, presenting barriers to entry. But as access to data and digital solutions steadily improves, and with supply chain risk so high on the boardroom agenda, TDI is a product that has the potential to close the protection gap.

Your insurance broker as supply chain risk advisor

As the ability to model supply chain risk grows, the insurance industry is taking a more proactive approach to engaging with clients and helping them adjust their supply chain strategies to our changing world.

The interconnectedness of supply chains makes assessing risk a complex task for most businesses. Rather than looking at global events and business interactions in silos, they must consider these factors in tandem to appreciate the bigger picture of supply chain risk.

Armed with a growing ecosystem of insurance products and information, broker partners play a valuable advisory role in helping business leaders understand their true exposures and identify the supply chain solutions that work best for them.

"The more we can offer our clients in terms of advice around not just insurance, but around mitigating risk, the better we are at our roles," explains Alec Russell. "Our view at Gallagher is that we want to be able to provide underwriters with information and data faster and more accurately, and we welcome a conversation with others who see this need."

Published May 2026