The global electronics industry is at threat from semiconductor supply chain issues caused by geopolitical tensions, nat cats and manufacturing location risk.

A report, published today by Lloyd’s and WTW, finds that the sector is most concerned by the medium-term risk landscape, which is where significant scope exists for increased collaboration with insurers.

Of survey respondents in WTW’s Global Supply Chain Survey, 81% said a lack of insurance solutions was among the greatest challenges in the medium term. Those interviewed also highlighted eight key supply chain risk drivers: economic pressures, supply and demand changes, talent and labour, raw materials and components, technology, packaging and transport, regulatory, geopolitical risks, climate change and sustainability.

These risk drivers matched those of the food and drink industry, which favoured end-to-end supply chain coverage. In contrast, the semiconductor industry recognised large financial exposures in their supply chains which traditional risk transfer cannot currently meet and so favoured risk transfer at key moments in their chain.

The report proposes that by adopting a customer-centric view of risk, the semiconductor industry could act as an example of a resilient, digitalised supply chain – with data and bespoke cover used to supplement retained risk.

Rebekah Clement, director of sustainability, Lloyd’s said: “The semiconductor industry is acting now to respond to global demand and spark technological innovation. While the sector is mature in its approach to risk management, there are always unforeseen events that can impact production.

“The insurance industry has a critical role in partnering with semiconductor businesses to help them build resilience to manage the supply of mission critical products and to keep our digitally connected world turning.”

Hugo Wegbrans, global head of broking at WTW added: “Global supply chain complexity continues to increase, whilst transformative technologies powered by semiconductors are driving rapid change and progress in many areas. Like many other businesses, Semiconductor companies are aware of their supply chain vulnerability and are actively working to increase their resilience. For the gaps, they are looking to the insurance industry to partner.

“The solutions provided by our industry provides only a wafer-thin patchwork of protection. Semiconductor businesses need to explore different ways to manage the significant financial exposures to achieve true resilience. Traditional risk transfer will only be one component of achieving that.”

The global electronics industry is estimated to have a market value of almost US$600bn and supports a US$2.2trn electronics sector that in turn drives almost US$90trn of global GDP.

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