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TheThe FaculFaculty of International Business andty of International Business and

EconomicsEconomics

Business interruptioninsurance policy

The best way to predict theThe best way to predict the

future is to create itfuture is to create it

EinsteinEinstein

Cosmin Jolde, Univ. Lecturer

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BUSINESS INTERRUPTION COVERAGE

The Business Interruption (BI) cover indemnifies for loss of GrossProfit due to diminished business volume and increased cost ofoperations, as a consequence of an event covered by a property

damage insurance

The scope of the insurance is returning the Insured Company to thestate it was before the event (the cause of interruption).

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COVERAGE HIGHLIGHTS

The Company is indemnified if operations areinterrupted due to an event that causes materialdamages and is covered through an insurance policy.

A second type (Contingent Business Interruption) iscaused by the loss of a strategic supplier / client(Dependency based)

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COVERAGE HIGHLIGHTS

This insurance line looks to two indemnity tools: value andtime.

The sum insured results from a complex formula, whichmay vary from one insurer to the next;

The maximum indemnit eriod re resents the maximum

period after which the company should be functioning at anormal level. The indemnity will be granted for no longerthan this period of time.

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COVERAGE HIGHLIGHTS

BI is granted as extension to a materialdamage coverage, that can take the form of aproperty damage policy or the more specific

type of electronic equipment, machinerybreakdown coverage etc.

It may also appear as Increased Cost of

Working (ICOW), a coverage customised forcompanies without manufacturing operations.

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Risk Profile

It is often seen that consequences of a material damage, evenindemnified, have a long lasting impact on the company. Acompany continues to fight losses, sometimes recovery being

rather difficult.

The most at danger companies for serious difficulties, evenbankruptcy, are those that depend on a certain location or on

spec c, g -tec mac nery.

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Underwriting information required

A specially designed questionnaire needs to be completed inorder to evaluate the risk for business interruption. Thequestionnaire looks at, amongst other:

the supply of complete data regarding the operations andthe business processes

data on the companys revenue and expenditures

information on previous losses

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Note:

This summary is for you reference only.

The information presented may varyfrom one insurer to the other and are

subject to change.

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Thank youThank youThank youThank you!

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