Business Interruption (BI)
Business interruption insurance replaces lost operating profit and continuing costs when an insured physical damage event interrupts business operations.
Comparison profile
- Trigger
- Occurrence
- Insured interest
- The insured's gross profit and continuing fixed costs following an insured physical damage event that interrupts business operations.
- Rating basis
- Insured gross profit / annual turnover, Indemnity period, Industry and interruption sensitivity, Quality of the underlying property risk
- Typical limits
- Sum insured based on annual gross profit projected over the indemnity period, commonly 12 to 36 months depending on reinstatement complexity.
- Typical deductibles
- Time deductible (waiting period) of a few days, aligned with the per-occurrence deductible of the underlying property policy.
- Target segments
- SME, Industry, Multinational programmes
Insured events
- Fire and explosion at an insured location
- Natural hazard damage (storm, flood, earthquake, where insured)
- Machinery breakdown (if extended)
- Escape of water
- Impact, collision, and burglary-related damage
Key exclusions
- Losses without an underlying insured physical damage event
- Denial of access without physical damage (unless specifically extended)
- Pandemic and infectious disease losses (unless specifically extended)
- Losses arising after expiry of the indemnity period
- War and nuclear energy
Scope of cover
Insured is the interruption loss resulting from covered physical damage: lost operating profit plus continuing fixed costs (including payroll), plus loss mitigation costs such as alternative production or express freight. The agreed indemnity period – the maximum period for which the loss is compensated – is decisive.
Critical parameters
The indemnity period must cover realistic reinstatement and ramp-up times (often 18 to 36 months for special machinery and supply bottlenecks). The BI sum is based on the insured gross profit; growth and seasonality effects must be factored in. Time deductibles (waiting periods) filter out minor interruptions.
Interfaces
Losses caused by events at suppliers or customers are covered by the CBI extension; organisational resilience is provided by business continuity management.
Comparison and delineation
Business interruption cover is contingent on an insured physical damage event at the policyholder’s own premises and normally forms part of the property programme it is written alongside. Where the interruption originates at a third party – a supplier, customer, or utility – CBI extends the same indemnity-period logic to that contingent exposure instead of the insured’s own property. Machinery breakdown BI similarly extends the trigger to internal mechanical or electrical breakdown perils that standard fire and all-risks wordings typically exclude. Business continuity management is not a risk-transfer product but the organisational discipline that reduces the indemnity period and loss magnitude on which the BI premium is priced.