In this article, we discuss Non-Damage Business Interruption (NDBI).
It is based on our book:
International Property Insurance Programmes – From Theory to Experience-Based Practice (ISBN 978-1-78222-901-8)
What is meant by non-damage business interruption?
We could not trace any official or formal definition, but in general it is perceived as a way of protecting organisations when covered events cause a disruption to their earning ability irrespective of whether the event originates from physical damage.
Examples of such extensions that we have seen in the market range very broadly and widely from cyber coverage (physical and non-physical damage) to coverage for a number of disruptions, such as withdrawal of regulatory approval or the license to produce; contingent business interruption due to non-physical damage affecting a key supplier; and blackout. Additional examples include crisis management, waterway access, accidental interruption of services, extra logistics costs and probably many others that will be introduced into the market going forward.
This raises the question as to whether business interruption should undergo a fundamental transformation to become a separate and more holistic line of business inclusive of risks and exposures that underwriters can understand, assess and price accordingly.
The adds-on approach is just not the right approach to include extensions and coverages which underwriters do not understand.
The insurance market needs to prepare its evolution into a new method of business interruption insurance and decide how it will execute it as a win-win approach to ensure that customer needs are addressed while at the same time safeguarding the sustainability of the insurance carriers without jeopardizing the profitability of the book of business.
It is a fact that the current business interruption insurance product does not embrace all the different needs of the market in general and customers in particular in terms of innovation and simple coverage to deal with disruptions originating from material and non-material damage.
Expect the unexpected to happen.
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