Abstract: Due to the frequent occurrence of emergencies such as epidemics and earthquakes, business interruption insurance is often used as an emergency management measure to transfer risks. Based on business interruption insurance, a decision optimization model of insuring and pricing for dual-channel supply chains is built with suppliers buying insurance first and retailers following pricing. An effective revenue-sharing contract for coordination is designed, and extended to differential pricing between suppliers and retailers for online direct sales and offline retail. Results show that with business interruption insurance, the insurance compensation offsets the impact of penalty and shortage costs on price increases, so that both suppliers and retailers tend to reduce prices for promotion to improve their own profits. When the proportion of online demand is larger and the premium rate is smaller, the willingness of suppliers to insure is stronger; with the increase of the proportion of offline demand, the risk transfer effect of purchasing insurance on suppliers becomes weak, and the risk transfer effect on retailers becomes strong. When the cross-price elasticity is large, retailers prefer differential pricing.

Key words: business interruption insurance, supply risk, dual-channel, revenue sharing contract, differential pricing