Lloyd’s has published the first in a series of three reports exploring supply chain risk delivered in collaboration with WTW – ‘Farm to fork: Rethinking food and drink supply chains’.
The report focuses on the critical threat to the global food and drink industry due to the growing interconnectedness and complexity of global supply chains, which has increased the sector’s vulnerability to both natural perils, such as the effects of extreme weather, and manmade threats, like Russia’s invasion of Ukraine.
It outlines a practical roadmap based on increased collaboration between businesses, brokers and insurers, which identifies opportunities for insurance to innovate in the protection they can offer business and how supply chain risk management technologies, including data capture and visualisation can improve resilience.
The research identifies several key factors driving risk across food and drink supply chains, including economic pressures, demand changes, labour challenges, technology, transport, geopolitical and political risk, and climate change and sustainability, and highlights the opportunity for the insurance industry to develop new products to protect against the loss of Tier 2 suppliers, notifiable pests and diseases, transit delays and commodity price volatility.
It also identifies a lack of alignment between companies’ business-critical risks and the insurance cover they have purchased. For example, the research found that while 82% of businesses have at least some insurance for extreme weather impacts to their supply chain, less than a third (31%) believe that this is sufficient to address the risk to their operations.
Through its leadership of the Sustainable Markets Initiative Insurance Taskforce, Lloyd’s is exploring the adaptability of current crop insurance models to emerging countries which play a vital role in global food security.
Examples such as WTW’s Supply Chain Risk Diagnostic tool provides a framework to digitally model supply chain components, allowing businesses and insurers to more effectively measure, monitor and manage their risks.
Rebekah Clement, Sustainability Director at Lloyd’s said: “In today’s global economy, the food and drink industry is no stranger to the effects of shifting geopolitics and economic uncertainty. It is arguably more important than ever that businesses ensure the safe and timely transportation of critical and often perishable products which maintain a level of balance for global food security.
“Whilst insurance cover for supply chain risks does exist today, the findings in our research point to a lack of alignment between shifting key risk drivers for food and drink business and their current insurance cover. Uniquely positioned to respond, through initiatives like Lloyd’s Futureset, the Lloyd’s Lab and the SMI, the Lloyd’s market can further open lines of communication between food and drink businesses and their insurers and look to this research as roadmap for potential product innovation”.
Sue Newton, Food and Drink Practice Leader GB, WTW, said: “This Lloyd’s Futureset/WTW Research Network report is part of our ongoing commitment to keeping pace with the changing risk landscape to help protect food and drink businesses and support their successful growth.
“We continue to deepen our understanding to drive improved supply chain resilience and to empower food and drink organisations’ in optimising their risk protection in the face of ongoing volatility, and this work with Lloyd’s brings an added perspective to this.”
Scan here to download the app