The The Facul Faculty of International Business and ty of International Business and

Economics Economics
Business interruption
insurance policy
The best way to predict the The best way to predict the
future is to create it future is to create it
Einstein Einstein
Cosmin Jolde, Univ. Lecturer
BUSINESS INTERRUPTION COVERAGE
The Business Interruption (BI) cover indemnifies for loss of Gross
Profit due to diminished business volume and increased cost of
operations, as a consequence of an event covered by a property
damage insurance
The scope of the insurance is returning the Insured Company to the
state it was before the event (the cause of interruption).
COVERAGE HIGHLIGHTS
The Company is indemnified if operations are
interrupted due to an event that causes material
damages and is covered through an insurance policy.
A second type (Contingent Business Interruption) is
caused by the loss of a strategic supplier / client
(Dependency based)
COVERAGE HIGHLIGHTS
This insurance line looks to two indemnity tools: value and
time.
The sum insured results from a complex formula, which
may vary from one insurer to the next;
The maximum indemnity period represents the maximum The maximum indemnity period represents the maximum
period after which the company should be functioning at a
normal level. The indemnity will be granted for no longer
than this period of time.
COVERAGE HIGHLIGHTS
BI is granted as extension to a material
damage coverage, that can take the form of a
property damage policy or the more specific
type of electronic equipment, machinery
breakdown coverage etc.
It may also appear as Increased Cost of
Working (ICOW), a coverage customised for Working (ICOW), a coverage customised for
companies without manufacturing operations.
Risk Profile
It is often seen that consequences of a material damage, even
indemnified, have a long lasting impact on the company. A
company continues to fight losses, sometimes recovery being
rather difficult.
The most at danger companies for serious difficulties, even
bankruptcy, are those that depend on a certain location or on
specific, high-tech machinery. specific, high-tech machinery.
Underwriting information required
A specially designed questionnaire needs to be completed in
order to evaluate the risk for business interruption. The
questionnaire looks at, amongst other:
the supply of complete data regarding the operations and
the business processes
data on the companys revenue and expenditures
information on previous losses
Note:
This summary is for you reference only.
The information presented may vary
from one insurer to the other and are
subject to change.
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