Consumer Retail – Supply Chain Risks
The Problem:
A U.S.-based home goods chain with locations along the East Coast faced high costs and limited coverage options managing supply chain disruption risks, especially those related to hurricanes. Traditional insurers charged high premiums for business interruption coverage, often excluding coastal storm-related events, creating significant gaps.
The retailer needed a tailored solution to protect revenue streams while ensuring rapid recovery after a major event, such as a multi-month supply chain shutdown following a Category 4 hurricane.
The Solution:
Partnering with Nova, the retailer developed a Customized Insurance program within a Segregated Portfolio in the Cayman Islands, focusing on:
- Risk Exposure Analysis: Identification of key disruption triggers, including port closures and transportation bottlenecks.
- Parametric Coverage Design + Nova ART Specialty:
- Structured a parametric trigger based on sustained wind speeds exceeding 74 mph.
- Expanded protection through the Nova ART Specialty Program, covering risks like reputational damage, supplier failures, and critical contract disruptions.
- Retention and Reinsurance Balance:
- Minor disruptions (up to $500,000) retained internally.
- Major disruptions (exceeding $2M) reinsured internationally at 40% lower rates.
- Fronting Arrangement: Nova facilitated a compliant policy issuance through a U.S.-licensed fronting insurer.
- Legal Separation: The SPC portfolio ensured full financial and legal isolation from other entities under Cayman law.
The Benefits:
- Rapid Claims Payouts: Parametric triggers enabled payouts within 72 hours post-event.
- Cost Efficiency: Achieved 40% savings versus traditional insurance coverage.
- Tailored Protection: Addressed both natural disaster and reputational supply chain risks.
- Enhanced Risk Awareness: Enabled proactive supplier diversification and risk mitigation.
- Financial Stability: Reinvested retained capital boosted online and export revenue by 15%.
- Scalability: Easily integrated new operational risks without needing new setups.
The Impact:
The company now operates with a dynamic, resilient risk management strategy that protects critical supply chains, strengthens financial outcomes, and enables sustainable growth in volatile environments.