In the purpose of "studying the adequacy and effectiveness of a supply chain business interruption cover and identifying methods of defining the scope of cover of this new product line as well as their implications", we start by setting the background of the business interruption market. We present the evolution of the business interruption product from its inception until today and we define the supply chain interruptions.
Next, we evaluate the need for a Supply chain business interruption cover in terms of why the product should be needed and in terms of the substitutes available on the market. We then discuss possible methods for defining the scope of cover with illustration from the auto-manufacturing industry. The named suppliers' method for defining the scope of cover is first explained followed by a presentation of two other alternatives for defining the scope of cover: the proportions and the insurance pools methods.
Finally, we address how these alternatives affect three types of stakeholders:
1) The insured.
2) The insurer in terms of underwriting and claims handling.
3) The reinsurer.