Business interruption do wordings respond to current business practice
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Business Interruption – do wordings respond to current business practice?. 2007. 1. Reference: LBIA 2007. Modern business v current wordings. Agenda for today Consider how standard BI policies respond to modern business practices How would new policies be underwritten?. Presenters.

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Business interruption do wordings respond to current business practice

Business Interruption – do wordings respond to current business practice?

2007

1

Reference: LBIA 2007


Modern business v current wordings
Modern business v current wordings business practice?

Agenda for today

  • Consider how standard BI policies respond to modern business practices

  • How would new policies be underwritten?

LBIA October 2007


Presenters
Presenters business practice?

  • Wordings – Diane Jenkins, Technical Director, Europe, Aon Mergers and Acquisitions Group.

  • Underwriting information – Steve Manville, AIG Vice President, Property Division, UK & Ireland

LBIA October 2007


Wordings
Wordings business practice?

  • Contract certainty

  • Do current wordings respond

  • What about head office activities that do not generate revenue

  • Should we still be relying on Blundell Spence?

LBIA October 2007


Blundell spence agreement
Blundell Spence agreement business practice?

  • Letter of intent issued by insurers

  • Agreed that reasonable increased costs of working would be paid following loss of factory or head offices

    BUT

  • Originally designed to apply to manufacturing risks

  • Applies to own premises/activities

  • No formal agreement – market practice

  • How often do brokers request letter of intent?

  • Extent of cover implied – would insurers pay where the office functions are outsourced?

LBIA October 2007


Example outsourcing
Example - Outsourcing business practice?

  • Example of Outsourcing

  • Many outsourced activities do not generate revenue – no effect on turnover

  • Need to consider special cover for non-revenue generating activities

  • Use amended AICOW?

  • Consider an R&D type wording?

  • Consider how a standard wording responds even where revenue is affected by outsourced activity

LBIA October 2007


Definitions
Definitions business practice?

Premises

  • Different definitions appear in different policies but an example is:

    The word “Premises” shall mean any premises owned, leased, occupied or utilised by the Insured within the Territorial Limit"

  • This is a wide definition and many policies will have narrower definitions

  • Not sufficient to include outsourcer’s premises

LBIA October 2007


Definition of premises
Definition of Premises business practice?

Any Premises, owned, occupied, utilised or used by the Insured or any contracted outsourcers of the insuredwithin the Territorial Limit

  • Very wide definition

  • Will cover all premises owned, occupied, utilised or used by outsourcer

  • Insurers may not be happy to give such wide cover!

LBIA October 2007


Definitions1
Definitions business practice?

Territorial Limit:

  • The definition of premises refers to the territorial limit so needs to be right

  • May need to be worldwide depending where the outsourcers have premises

LBIA October 2007


Definitions2
Definitions business practice?

The result of changing all the definitions is:

A VERY WIDE POLICY

  • A happy client!

LBIA October 2007


Suppliers extension
Suppliers Extension business practice?

Treat outsourcers as suppliers – specify limits

  • Extends definition of Premises and Incident

  • But some types of suppliers excluded e.g telecomms

  • All the premises of the outsourcer need to be added

  • Assess accumulation issues

  • Clarity of cover

  • Option to choose the correct sub limit

  • Changes during the period of insurance

LBIA October 2007


Other issues
Other Issues business practice?

  • Still need to check definitions of business, insured, gross revenue, territorial limits

  • Subject to all other terms conditions and provisions of the policy.

  • Warranties/conditions precedent

  • Terrorism - Need to buy back worldwide cover if territorial limits are worldwide

  • Subrogation

  • Utilities extension

LBIA October 2007


Outsourcing underwriting challenge

Outsourcing business practice?Underwriting Challenge

Steve Manville, AIG Vice President, Property Division, UK & Ireland


Can insurers respond
Can Insurers respond? business practice?

  • Barriers

  • Solutions

  • Market Response

  • Summary

LBIA October 2007


Barriers
Barriers business practice?

  • Appetite

  • Contract Certainty / ability to handle claims

  • Inability to understand the risk

  • Capacity

LBIA October 2007


Solutions
Solutions business practice?

  • Information

LBIA October 2007


Example risks
Example Risks business practice?

  • PD / BI £12m

PD

BI

BI EML

Outsource

Risk B

£2m

£10m

£2m

£10m

Risk A

£10m

£2m

£2m

£250k

LBIA October 2007


Solutions1
Solutions business practice?

  • Information

  • Wording

  • Appetite

LBIA October 2007


Summary
Summary business practice?

  • Barriers:

    • Appetite

    • Contract Certainty / ability to handle claims

    • Inability to understand the risk

    • Capacity

  • Solutions

    • Information

    • Wording

    • Appetite

LBIA October 2007


Can insurers respond1
Can Insurers respond business practice?

YES

LBIA October 2007


Questions
Questions business practice?

LBIA October 2007


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