To provide insurance to companies of all sizes against pricing risk at a time of unprecedented volatility in the raw materials market, ChAI, the AI-driven commodity intelligence company, has launched ChAI Protects.
Designed with support from FMCG, pharma, automotive and food production companies, ChAI Protect enables companies around the world – from SMEs to Fortune 500s – to protect their growth by covering themselves from cost-based uncertainties. This innovative price risk insurance will be of most value for raw materials where hedging is currently not possible, as no accessible derivatives markets exist. ChAI Protect is already utilised by large publicly traded firms and is underwritten by tier one, A-rated, underwriters.
Corporate purchasing teams increasingly have to navigate unparalleled price moves in a wide range of essential commodities. From cocoa to copper, ‘black swan’ pricing events have seemingly become the new normal. Whether companies are manufacturing cars or chocolate bars, executing purchasing strategies that protect margin and minimise supply chain pricing risk has never been harder.
For all companies, delivering growth in the current environment of increasing raw material price volatility is more challenging; and for smaller companies making the wrong purchasing decisions can have existential consequences.
Supporting companies of all sizes
Commenting on the launch, Tristan Fletcher, CEO and co-founder of ChAI, stated: “At a time of unprecedented commodity pricing volatility, cost-based uncertainty can be existential for businesses. So we are delighted to support smaller companies as well as larger corporates with this innovative AI driven insurance product, creating pricing mitigations that were previously only available to multinationals and speculators through hedging strategies.”
“We are proud that ChAI Protect gives companies the ability to insure themselves in this way for the first time. In particular, for recycling materials, where it is currently almost impossible to offset price risk, we are delighted to offer a solution that addresses one of the key reasons these materials are not more widely used.”
Effectively pricing insurance premiums
ChAI’s AI-driven commodities market forecasting assesses thousands of data points every day creating actionable, accessible, insights that are bespoke to corporate purchasers, creating an understanding of the probability of any price being hit over a 12 month period.
These insights allow ChAI to effectively price insurance premiums for price indices matching any conceivable contractual obligations with suppliers, simulate underwriting portfolios and enable the ability to offer premiums that reflect the true risk of a price being hit.
Richard Chattock, CEO of Insurtech Gateway, said: “Industrial supply chains face increasing price volatility in commodities with the majority unable to access hedging tools. ChAI’s new insurance product solves this problem. We were really impressed by ChAI’s deep data insights into market and pricing dynamics, and are looking forward to supporting them as they scale this new product.”
