Contingent Business Interruption
Contingent business interruption covers loss of income arising when physical damage at a supplier or customer disrupts the policyholder's own operations.
Concept
Contingent business interruption extends classic business interruption insurance to cover loss of income suffered by the policyholder when an insured physical damage occurs not at the policyholder’s own operation, but at an important supplier, customer, or other business partner, thereby disrupting the policyholder’s own business operations.
Relevance for Supply Chains
Given globally interconnected supply chains, contingent business interruption cover has significantly grown in importance, as even a localized physical damage at a single key supplier can trigger production stoppages worldwide.
Scope of Coverage and Limitations
Insurers frequently name the specific covered suppliers or customers under this coverage, or limit the coverage to events within a defined radius or a specific tier of the supply chain, in order to keep the accumulation risk manageable for the insurer.