Risk experts say offshore production, tighter global supply chains and rising natural catastrophe costs are leaving more businesses in danger of underinsurance.

Companies that move facilities abroad to reduce costs are often caught unprepared by natural disasters, particularly in less-developed countries or where regulations are less stringent, according to a white paper from TUV SUD Global Risk Consultants.

“While cheaper to operate in, emerging markets largely struggle to handle large-scale natural and man-made disasters… due to a lack of awareness, highly vulnerable facilities, funding, support and poor infrastructure.

“Even companies that successfully secure their own interests, protecting their buildings and machinery, are likely to experience business interruption as a result of large disasters.”

The growth of complex, global supply chains, including “just-in-time” models, is a key driver of business interruption losses.

The Munich-based consultancy, which offers testing and inspection services, says companies need to understand and mitigate risks, and develop a disaster plan.

It says catastrophe models do not provide sufficient data for risk mitigation and companies should consider site-specific analyses.

An Allianz study, quoted in the paper, shows business interruption was the top global business risk last year, with fire and natural catastrophes the leading causes.

The white paper was posted on the Risk and Insurance Management Society website.