When facing a crisis, many business owners turn to their executives, CPAs or other advisers to assist in preparing the claim. Often, the preparation your business implements before disaster strikes makes the difference in how well your coverage protects you. Brunswick Companies' risk management consultants couple our understanding of the complex intricacies of your specific policies with insight into insurance company requirements. Our purpose is to handle all aspects of the claim, every detail, so you're free to devote all your energies to restoring your business. Forms of Standard Business Interruption: covers the loss of income that a business suffers after a physical damage at the same facility. While insurance does not take into account loss of market share, declines in investor confidence or share price losses, it ensures short-term liquidity for the insured to mitigate financial impact. Intrinsically linked, revenues, profits, reputation, market position and share price are seen as the pillars of corporate resilience: A blow to any of these props could cause serious issues for a company and its management team.
To mitigate potential damage and protect themselves against financial losses following a supply chain disruption, companies can seek insurance for business interruption (BI) and contingent business interruption (CBI) as part of their property insurance.
CBI insurance responds when the affected property is controlled by a supplier or customer that is important to the insured party (the “insured” or policyholder). Industrial insurers such as Allianz Global Corporate & Specialty SE typically offer policyholders sub-limited CBI coverage or limits that are lower than the property insurance policy’s full limits.
Even with supply chain data, calculating risk accumulation is challenging for any insurance company.
In spite of limited data availability, insurance solutions can be provided if the underlying design of a company’s supply chain management (SCM) is understood by the insurer and makes up for any missing data.
Since the inception of BI and CBI insurance, which is provided through property insurance policies, the coverage trigger for both has been property damage resulting from perils such as fires, earthquakes, windstorms and flooding.
According to The Business Continuity Institute’s Supply Chain Resilience 2013 study[i], these so-called non-damage perils are a bigger threat than natural catastrophes. Any business which generates revenues (and name one that doesn’t) risks facing this same situation. Commonly known as “business interruption” or “business income” coverage, insurance is available to pay your profit lost if due to a cause of loss covered by the policy. Covered causes of loss for your business income insurance will usually be the same as those covered in your building policy, such as fire, theft, and windstorm.
After the fire, his insurance carrier will ask for information documenting the lost profit. One frequent misunderstanding arising from this type of insurance is what will actually be paid following a loss.
Please refer to the sample policy contract for the full list of exclusions under this policy.
In addition to floods, fires, extreme weather or business upheavals due to road or sewer line repairs, your exposures may include internet outages, website hacker attacks or damage to computer systems. We act as your on-site authority on insurance loss to assist you in preparing, filing and adjusting your insurance claim. Our experience allows us to expertly negotiate property and business interruption claims, so that our clients receive settlements more rapidly than if those claims were handled by outside agencies.
We'll talk with the insurance company so you're able to talk with your customers, employees and critical vendors.

This evolution, coupled with a trend among companies to source globally and a rise in disruptive natural catastrophes (often in those areas where new supply capacity has been developed), has led to growth in business and contingent business interruption.
Transferring financial risks to an insurer is therefore a tool for managing supply chain interruptions.
Essentially, both BI and CBI insurance cover AGCS’s clients’ net profits in the event an insured peril damages or destroys a covered property and interrupts production.
Both insurances also provide cover for external perils, too, which could include natural catastrophes—such as hurricanes, earthquakes, flooding and landslides—and fire.
The increasing attention property insurance policyholders pay to supply chain risk management is encouraging to insurers. However, identifying and sharing this information is still a new approach for both parties.
Disasters like flooding, earthquakes or hurricanes likely damage or destroy the operations of numerous policyholders or a cluster of suppliers of critical component parts for a group of policyholders in the same industry.
BI and CBI insurance have helped companies maneuver through what otherwise would have been crushing supply chain disruptions.
For example, 35 percent of manufacturing company respondents cited unplanned outages of information technology or communications systems, 43 percent cited transportation network problems and 35 percent cited energy scarcity as threats.
Dempsey reported that 61 percent of the survey’s respondents suffered supply chain disruptions within the past five years, but that insurance covered lost income and extra expenses for less than half as no physical damage was involved[ii]. AGCS, for example, has launched a policy to cover many traditionally uninsurable non-damage perils that have either disrupted supply chains in recent years or that risk managers fear could cause major disruptions, such as closed air space and political risk. This development has been the catalyst for emerging coverage of risks previously perceived as uninsurable, and thus made it possible for insurers to offer new risk transfer solutions to their clients that simply were not available in the past. Because although your building and personal property insurance will do a fine job at replacing your physical assets, they don’t pay a nickel towards your lost profits! One type of loss not covered, for example, is lost revenue resulting from bad business decisions. Please refer to the policy contract for the precise terms and conditions of this insurance plan. Remember, the burden of proof in any loss is on you as the policyholder, not on the insurance adjusting representatives of your insurance company.
Manufacturers are increasingly being caught by the closure of critical suppliers, a trend that has both insurers and businesses concerned. Both protections also cover some ongoing costs for the policyholder, such as wages, building lease or mortgage costs and other fixed costs. However, CBI insurance would be triggered if the insured is still forced to slow or halt production—and therefore loses profits—because the supplier with damaged operations cannot deliver critical raw materials or component parts, or the customer does not request the parts from the insured. An example of an internal peril is a machinery breakdown.While insurance is an important risk management tool for companies with complex supply chains, taking out insurance should not be seen as stand-alone solution.
Given that business interruption and supply chain-related losses typically account for half, and sometimes up to 70 percent, of insured property catastrophe losses, insurers are beginning to put much greater weight on supply chain risk when underwriting large industrial risks.
In fact, the severity of supply chain disruption in 2011 on the back of natural catastrophes (earthquake and tsunami in Japan, floods in Thailand) put a significant portion of the world’s suppliers of hard drives out of business for months, and thereby brought the biggest PC manufacturers around the globe to a prolonged and costly halt.
If that cluster of suppliers supports a large segment of an insurer’s clients, that accumulation of risk means a huge loss for the insurer.
This policy extends BI and CBI coverage to core non-damage scenarios, including utility service interruptions, labor strikes, insolvency of suppliers and transport operators, or actions taken by civil and military authority—such as closing air space because of a volcanic ash cloud (as in the case of the eruption in Iceland in 2010) or cordoning off areas.

And at some point, it’s going to become very clear to you that the real reason you wanted to be in the restaurant business was not to own a building. And the profit you are making a claim for is that lost during the nine months the business is closed by the fire.
If you normally would have grossed $50,000 month for the nine months, the insurance will not pay you $450,000!
Not if you remember much of that $450,000 went to pay for bills that may no longer be coming in, or will be greatly reduced during the rebuilding.
Business interruption insurance responds when the insured owns the property that is damaged or destroyed. Insurance addresses part of the risk, but practical risk management is also required from each company to prevent or at least reduce that risk. This has prompted industry and insurers alike to consider new ways of mitigating risk, including data sharing, collection of more data, better analysis of data and more effective action on strengthening supply chains.There are two good reasons for policyholders to be transparent with supply chain data. Therefore, choosing a well-capitalized insurance company also is key when transferring supply chain risks to an insurance policy.
But as policyholders demand coverage that responds to more perils than those addressed by traditional BI and CBI insurance, new forms of cover are being developed. Clearly the better your recordkeeping, and the more stable your business revenues, the better the estimate of your lost earnings. Insurance, advertising, payroll and other types of overhead will still have to be paid, although the expenses will likely be smaller than if the business was in full operation. Typically, clients can tap their full property insurance policy limits to cover their business interruption losses.
Business interruption and CBI insurance typically cover supply chain disruptions resulting from a physical loss or damage to insured property.
The supply chain can be compared to a Russian doll in which for any direct supplier, there exists multiple layers of suppliers. And if the insurance did cover full employee payrolls for an unlimited time, one or more of your employees might decide a good fire now and then is a nice option to create paid vacations!
Standard insurance cannot restore an eroded market position after a policyholder’s customers have turned to competitors that did not have to curtail production after the event, nor can it re-inflate sagging share values after investors have lost confidence in a company’s ability to manage its way through adversity. With sound data, the insured can develop a business continuity plan that allows the company to stay in operation even if a key production facility or supplier unexpectedly closes down. However, insurance provides financial liquidity in the case of an insured supply chain interruption to mitigate or prevent the impact on the balance sheet. The second reason has a direct impact on the amount of insurance a client wants to take out. In order to ensure a solid capitalization, insurance companies need to assess their accumulation exposure. A good rule of thumb is to think of it this way: the insurance doesn’t look at what your business put in your pocket, but rather what the covered loss took out. The more transparency the insurance company receives regarding supply chain exposure, the better the demand of a client can be met.

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