Insurance-Driven Risk Mitigation and Technological Integration in Deep-Tier Supply Chain Finance

Abstract

This study examines the use of insurance players in deep tiers of supply chain finance (SCF) as a way of risk mitigation and efficiency improvement in technology. This study links up three fundamental questions: minimizing the financial riskiness of banks and SCF platforms by covering it with insurance, assessing the insurance structures based on different models that accommodate supply chains, and assessing the impact of technology in enhancing the efficiency of insurance in deep-tier settings. Methodology was a quantitative method where a sample size of 150 companies across different levels was analyzed using descriptive statistics, regression models, correlation matrices, and scenario stress tests. Findings suggest that a higher insurance coverage is much more important as it decreases the level of default (beta = -0.28 and p < 0.01), particularly in the presence of high rates of technological adoption. Parametric insurance is better than old models, and there is the lowest technological integration amongst the deep-tier suppliers, which is correlated to the risk. The paper also concludes that instituting InsurTech within SCF is critical in de-risking as well as resilience.