Business Interruption Underwriting
Risk assessment
How it works and makes money
How susceptible the cash flow is to interruption
How difficult it will be for the business to fully recover.
Understanding the business
Features affecting risk;
Trade
Activities
Seasonality
Premises and location
Machinery and processes
Raw materials and stock
Quantity of stock
Management.
underwriters must consider geographical implications as well as manufacturing and procedural implications when assessing risks
Quality management = better management = lower recovery time
BREXIT
increased wait time for imports/exports
increased tariff costs for imports/exports
Exchange rates volatile
Visa's meaning staff may be stuck
Long term purchase agreements may necessitate longer interruptions
Decisions can be based on:
Proposal form/statement of fact
Broker submission
Survey report
Business interruption reports
Company published material
Market profiles
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Name
Full address of all premises
The business
The cover ( perils required)
Maximum indemnity period
Uninsured working expenses
Sum insured
Any extensions required
Previous business and insurance history
Loss experience.
Check risk information and quality
Detail a risk improvement programme to ensure the risk is brought up to their minimum safety and security standards
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Layout of premises
Any separate buildings and their use
Construction and whether purpose-built
Reinstatement period including planning permission
Stock and machinery distribution
What the process involves and where it is carried out
Methods of heating and lighting
Maintenance and security precautions
Housekeeping and management attitudes.
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The business and how and where it earns its income
The interruption potential
The recovery scenario.
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The corporate brochure, literature and website
Periodic and interim reports
News bulletins and market briefings
In-house magazines.
New business claims
The client’s experience of running a business
Previous loss history
Any previous experience of the particular trade they are in.
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Advanced cover for new the indemnity period starts with the date that income would have been earned, that is the start-up date. It may then continue for the full length of the maximum indemnity period selected.
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DSU - Delayed Start Up
Rating a Risk
Loadings for negative physical features of the risk such as non-standard construction, heating or multi- tenancy
Discounts for positive physical features of the risk e.g. fire protection systems or good standards of housekeeping.
other insured perils, except theft,
generally follow the rate charged under the
material damage policy
other perils may be rated at 50% of the mat damage rate for a 12-month maximum indemnity period and be further reduced proportionately for longer periods
A lower theft rate than that charged for material damage cover will apply as any interruption following theft is likely to be very short as it is stock rather than production capacity which is usually affected.
Any perils that can cause damage resulting in a long interruption (usually known as the catastrophe or dry perils) are often rated at the full material damage rate.
flood risks that could pose greater interruption
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55% of water and sewerage pumping stations
28% of gas infrastructure
14% of electricity sub-stations.
Declaration linked
33% on top of estimate leeway for business growth
no underinsurance clause