Alternative Production Site

Why it matters for underwriting

Access to a qualified alternative production site fundamentally changes the loss profile of a total loss event: instead of a full stop for the length of the indemnity period, the insured can shift a meaningful share of output elsewhere and shorten the actual interruption. Underwriters need to know whether such an option genuinely exists, since its presence or absence is one of the strongest single drivers of how long a business interruption claim is likely to run, independent of how quickly the damaged site itself can be rebuilt.

Capturing the attribute and evidence

Proposal forms ask whether an alternative site is available, whether it belongs to the insured, a group company or a third party, and what share of primary capacity it could replicate within what timeframe. Underwriters look for a business continuity plan that names the specific site and its capabilities, a contractual arrangement such as a lease, tolling or capacity-sharing agreement, and, ideally, evidence that the option has been tested or exercised rather than assumed.

Effect on coverage, premium and conditions

A documented, contractually secured and tested alternative site supports a shorter, better-justified indemnity period and can moderate the premium relative to accounts with no contingency option. The absence of any alternative site, or reliance on an informal, untested arrangement, typically leads to a recommendation to extend the indemnity period, a loading reflecting the higher expected loss duration, or a condition requiring the insured to formalise a contingency site strategy.

Mitigation measures

Recommended measures include identifying and qualifying a specific alternative site in advance, securing access through ownership, group agreements or contractual tolling arrangements, pre-planning the equipment, permits and workforce needed to ramp up production there, and periodically testing the transfer through exercises to confirm the assumed timeframe is realistic.