Monitoring and managing the risks that may impact supply chains in Latin America are key to maintaining their functionality and reliability, as a single point of failure can quickly ripple to stop or limit business operations and cause serious financial and reputational losses.

Businesses that rely on robust supply chains to do business in Latin America are facing increased disruption risks. Top of mind for risk managers handling Latin American operations and logistics are concerns about geo-political instability (tariffs), climate change (extreme weather events), cybersecurity (data theft/ransomware) and financial liquidity (insolvency risks), among others. Monitoring and managing the risks that may impact supply chains in Latin America are key to maintaining their functionality and reliability, as a single point of failure can quickly ripple to stop or limit business operations and cause serious financial and reputational losses. This article provides insight into the insurance coverage options available to manage some of the key supply chain risks in 2025 for policyholders doing business in Latin America.

Contingent Business Interruption

Latin America is home to many countries susceptible to climate-change related risks, with millions of people displaced in past years as a result of natural disasters and weather-related events. These events often impact businesses that rely on suppliers (and other third parties) to conduct their operations. For example, a distribution warehouse housing key parts for a product that is destroyed by a storm might impact the ability of a manufacturer to then continue assembling the product.

Contingent business interruption (CBI) coverage protects against lost profits resulting from the “physical damage” to property of an affected supplier, vendor or customer. CBI coverage applies when the policyholder relies on the supplier, vendor or customer’s business to operate its own business. Unlike traditional business interruption insurance, CBI protects the policyholder against losses caused by damage to the property of third parties, rather than physical damage to the policyholder’s own property. In the cross-border context, CBI insurance may respond to physical damage to a key supplier’s warehouse as a result of social unrest. Policyholders doing business in Latin America must therefore review policy forms for endorsements (and exclusions) to ensure they cover the risks particular to the region or country in which they are doing business.

Cyber

Businesses in Latin America—like everywhere else in the world—are also increasingly concerned about the risks posed by growing cyber threats. While many businesses in Latin America are speedily developing their cyber capabilities and IT systems to protect against cyber threats, the speed in which the threats increase and become more sophisticated remains a top concern across the region, particularly among those that are less technologically developed.

Cyber insurance protects a business against the risks of cyber crime and digital threats. It covers first-party losses, including business interruption, restoration and crisis communications. It also covers third-party losses, such as data breaches, network interruptions and breach notification expenses. As cyberattacks continue to increase in Latin America, businesses are likely to experience more supply chain disruptions. For instance, the trucking, shipping, carrier and transportation industries rely on digital systems that are susceptible to ransomware attacks, particularly if those systems are outdated. Cyber insurance, however, generally covers risks that affect or originate from the policyholder, so supply chain risks (which often originate in a third-party’s business or operations) might not be covered. Thus, businesses with ties to Latin America should evaluate how their cyber policies interact with their business interruption insurance (and other insurance products) to maximize coverage should a cyberattack or digital threat impact their supply chain operations.

Cargo

The risk of losing cargo because of theft, corruption or hijacking is also high across some regions in Latin America. Likewise, the risk of sending cargo through rural or underdeveloped areas heightens the risks that poor road conditions will damage the goods during transport. For example, goods might spoil because of delays following road-related issues.

Cargo insurance is a coverage solution for transported goods. It protects against the risk of loss, damage or theft of goods during transit. In addition, it protects transportation companies against loss resulting from common on-road perils. Companies in the cargo industry, including trucking companies, should therefore consider whether a policy’s minimum limits are enough to cover their specific exposures, especially where a company transports high-value goods. Policyholders should also evaluate whether “poor packaging,” “inherent vice” and “loading/unloading” exclusions are sufficiently narrow so as not to limit the scope of necessary coverage for the risks related to the region in which they operate.

Trade Credit Insurance

The unstable geopolitical landscape in some countries in Latin America is also spiking demand for insurance solutions to potential financial downturns. Emerging markets, industries and developing regions offer a wealth of potential business opportunities across Latin America. But with those opportunities also come the challenges and downsides of operating new businesses with still-growing commercial infrastructures and of partnering with less-established and more risk-prone businesses.

Trade credit insurance, a risk management tool designed to protect a policyholder’s capital and cash flows, can mitigate these risks. Trade credit insurance aims to shield policyholders upon a business partners’ inability to pay for products or services, whether because of bankruptcy, insolvency or political upheaval where the business partner operates. Further, trade credit insurance can help policyholders in Latin America secure better financing terms from lenders because it provides an added layer of confidence that accounts receivables will be repaid even if a supply occurs chain disruption impacting cash flow. Often, policyholders can tailor their trade credit insurance coverage to fit their budget and risk profile. A policyholder may thus choose to cover only a select number of high-risk business partners in particular countries or lines of business. Policyholders, however, should be aware that trade credit insurers have often included technical and complex reporting requirements into their policies and rely on alleged disclosure failures as a ground to limit or foreclose trade credit coverage.

Supply Chain Insurance

Supply chain insurance (SCI) is a specialty “all-risk” type of insurance that responds to losses caused by supply chain disruptions that can be tailored to particular risks in a region or country. SCI is also customizable, so coverage can be tailored to the specific types of risks applicable to the policyholder’s business in Latin America. Unlike most commercial policies, SCI may cover losses beyond those resulting from physical damage (e.g., natural disasters), depending on the tailored policy language. Supply chain and international trade professionals doing business in Latin America should hence consider purchasing SCI to close potential coverage gaps and mitigate losses.

Takeaways

As businesses in Latin America continue to expand, so do supply chain vulnerabilities across the region. Businesses can confidently work with suppliers, vendors and customers in Latin America by implementing a comprehensive insurance coverage plan designed to mitigate losses from the region’s particular supply chain’s unique exposures. Accordingly, policyholders should evaluate how their various insurance policies interact to maximize coverage when a supply-chain related loss occurs.