The UK’s battering by Storm Arwen (Dec ’21) is estimated to have left one million homes and businesses affected by damage to the power network. Some faced at least four nights without power and others suffered a loss of their telecommunications network, including broadband.
The storm acts as a reminder of why manufacturing businesses are just some of those requiring good business interruption cover on their insurance policy. Should a business lack the power or internet connectivity to operate its machinery, losses can start to accrue.
Whilst, in many cases, a power outage is for a shorter duration than that experienced with Storm Arwen, climate change has led to more extreme weather conditions and more events on the scale of Arwen should perhaps be anticipated.
Some business interruption costs may be covered as standard, in the event of certain defined situations, within many manufacturing policies. Most of the aspects of business interruption that receive such cover, however, are linked to damage to the property itself.
To obtain any cover for an outage of the electricity or gas supply, may require the insured to have taken out an extension to their policy, which covers such an unanticipated event.
Cover extensions may be obtainable for damage to power and telecommunications supplies at the premises and also failure of supply. The latter may need to have been caused because of damage to power infrastructure within a certain radius of the business’s location.
Business interruption claims are typically calculated for businesses, other than those earning rental income, on the basis of loss to gross profit or estimated gross profit, loss of revenue or estimated revenue, loss of income or estimated income or an additional cost of working.
Of course, storms are not the only cause of business interruption. Determining what the threats to your manufacturing business may be, and then seeking to cover those risks, makes good business sense. Denial of access to your premises might be another cover to consider, but there are others, including property in transit or in storage and impacts occurring at suppliers’ premises.
Understanding how to keep your business running in the event of a disaster or major occurrence is something that should form part of business continuity planning for a manufacturing business – and other types of business besides. This is an area which you can discuss within an insurance broker, so you can see how insurance can form an integral part of your business continuity plan.
Your broker will highlight the “cause and effect” within your policy wording cover. This is so that you will understand what needs to happen to trigger the policy to cover an incident.
Policy wording can sometimes be hard to understand without the specialist advice of an insurance expert. A broker, who fully understands how your business operates and what key risks exist, can also help you to understand which extensions to your core cover would be relevant to your business.
To find a broker who can assist you with this type of business continuity planning, please get in touch.