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Luke Stratford
Claims Solutions Leader, Asia
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Singapore
The high costs of natural catastrophes, acts of terrorism, and other disasters that can directly affect businesses are well known. In 2017, global insured losses from disaster events totalled a record USD 144 billion, according to Swiss Re. But organisations’ normal operations also can be disrupted as a result of indirect causes. The good news is that businesses can take steps — including purchasing insurance coverage — to address many of these risks.
Beyond the direct effects of hurricanes, earthquakes, flooding, and terrorist attacks, business interruption can occur without physical damage to your property or contingent property. In the last decade alone, significant disruptions have resulted from:
Businesses can also be disrupted as a result of regulatory actions, raw materials shortages, product recalls or contamination events, and other factors. And there’s the potential that you’re indirectly affected as a result of natural disasters and other events causing damage to your suppliers’ suppliers.
In order to properly manage these potential causes of disruption, you must first understand the range of indirect exposures that could affect you absent a traditional physical damage trigger, especially your supply or value chain ones. Among other steps, it’s critical that you engage in enterprise risk and supply chain mapping, risk quantification, and other exercises to help you:
In addition to traditional insurance programs that can respond to direct physical damage, you should talk to your insurance advisor about options that address many other disruption types. These include:
With risk increasingly interconnected and interdependent in today’s rapidly changing world, your resiliency depends on how well you manage disruption, no matter its source. With the right mix of traditional and advanced risk mitigation and risk transfer strategies in place, you can overcome direct and indirect business interruption more effectively and better protect critical assets and your bottom line.
For the latest updates on Australia’s business interruption claims landscape, see:
COVID-19 Australian Business Interruption Test Case Update (May 2021)
COVID-19 Australian Business Interruption Test Case Ruling (Nov 2020)
Claims Solutions Leader, Asia
Singapore