Eruption of Iceland’s Grimsvötn volcano, which started on Saturday, appears to have slowed significantly early today, according to news reports.

Flights out of the U.K. returned to normal, and airports in northern Germany have re-opened, following a warning from the Volcanic Ash Advisory Centre that forced the cancellation of hundreds European flights earlier this week. 

Experts continue to monitor the situation closely.

Risk Management Implications

The April 2010 Eyjafjallajökull eruption resulted in significant business interruption for many organizations, due to stranded colleagues, disruptions to supply chains and planned business travel, and a lack of adequate property insurance coverage.

A volcano-related disruption, while typically covered by a property policy’s earthquake coverage, requires that physical damage causes a lack of access to the insured's location. Policies often have distance and time limitations defining where the damage must occur.

Supply chain insurance provides an alternative to traditional property policies, with coverage for both damage and non-damage-related incidents affecting a named supply and named supplier (of a product or service). The trigger to these policies is interruption to the production of the service due to supply failure.

To manage supply chains, Marsh recommends that organizations consider alternative routes to market in the event that goods cannot be moved to planned purchasers in a timely manner. Organizations should also make provisions for additional storage of excess products, collaborate with air cargo handlers to ensure availability of capacity, and review contractual obligations with suppliers and key metrics such as service level impacts between two parties (fill rates).

Marsh will continue to advise clients on the evolving conditions related to the Grimsvötn volcanic eruption.