Insurance Strategies for SMBs to Mitigate Supply Chain Disruption

What's Happening?

Small to midsized businesses (SMBs) are facing increased risks from supply chain disruptions, which are not adequately covered by basic business interruption or cargo insurance. Factors such as ransomware incidents, tariffs, and natural disasters can derail operations and create insurance gaps. In 2025, distressed debt exchanges surged nearly 60% to $3.5 billion due to these disruptions. Insurance companies are responding with higher premiums and tighter coverage, leaving SMBs vulnerable. Inflation is raising costs across the supply chain, impacting claims severity and replacement costs. Many SMBs are underinsured by 20%-30% on cargo and property policies. To address these challenges, SMBs need to consider four key insurance coverages: business interruption, logistics coverage, trade credit insurance, and cyber liability insurance.

Why It's Important?

The complexity of modern supply chains and the interconnected global economy pose significant risks to SMBs, which often operate on thinner margins and lack dedicated risk management teams. The rising costs and insurance gaps can lead to financial instability and prolonged recovery times. By understanding and implementing comprehensive insurance strategies, SMBs can better protect themselves against income loss, cargo damage, legal claims, and cyber threats. These coverages are crucial for maintaining business continuity and resilience in the face of supply chain disruptions.

What's Next?

SMBs should work with brokers and legal counsel to develop coordinated risk management strategies that integrate key insurance coverages. This approach involves structured risk reviews, vendor vetting, tighter contracts, and coordinated coverage to withstand supply chain disruptions. SMBs need to map international suppliers, assess tariff exposure, and audit business interruption values to align with current costs. Additionally, leveraging technology such as telematics and real-time cargo tracking can enhance claims documentation and response times.

Beyond the Headlines

The evolving landscape of supply chain risks underscores the need for SMBs to adopt a proactive approach to risk management. As supply chains become more digitized and automated, the attack surface for cyber threats expands, necessitating robust cyber liability coverage. The integration of insurance policies into a cohesive risk management strategy can provide a more resilient safety net, especially for businesses operating across borders and transportation modes.