By  on March 20, 2006

NEW YORK — As the apparel industry continues an expansion of sourcing goods overseas, companies are increasingly finding themselves facing greater risks, which is why traditional insurance coverage may not be enough.

As a result, insurance companies are looking for ways to better serve clients. Hub International Northeast, a subsidiary of insurance broker Hub International, recently launched a practice to address risk management needs unique to the apparel industry.

"Most companies in the apparel industry, especially manufacturers and distributors, look at their insurances and say, ‘I need property insurance, liability insurance, product liability insurance and workers compensation insurance.' With so many apparel manufacturers overseas, there's a lot of additional exposure to different kinds of losses," explained Ken Schreiber, senior vice president, of Hub International Northeast.

Overseas operations carry greater exposures, he said, which could interrupt business. In addition to the obvious risks associated with outsourcing production, such as fire or natural disasters, Schreiber said there's also "political risk" that must be considered when dealing with foreign countries where confiscation, nationalization or expropriation could affect sourcing.

There are also supply chain distribution risks that need to be mitigated. Insurance policies that pertain to cargo losses cover the physical loss of cargo. But for an industry like apparel, working within tight, 30-day lead times, shipment delays can mean lost shelf space at retail.

"There are a lot of these types of exposures that the [apparel] industry has that people may not even know they have," he added.

In some cases, additional insurance might be the solution. But often, a more creative approach is needed. In dealing with contingent business interruptions, there are insurance policies available that pay for loss of income resulting from losses that occur at a supplier location. There are also ways to establish contingency plans, for example, which involve identifying potential backup suppliers who can pick up the slack and stave off a supply-chain interruption, Schreiber said.

"There is so much apparel sourced from overseas, I don't see a slowdown. If anything, I see more and more coming from overseas. In the world we live in today, the risks overseas are greater and greater every day; businesses need to protect themselves as best they can," he said.

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