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Business Interruption (BI) Review

Calculating the potential loss of profit or revenue, and the time it can take a business to recover following an insured event is a complex process. Having incorrect BI sums insured can be costly and, in extreme cases, can threaten the very existence of a business.

What is Business Interruption (BI) insurance?

Business Interruption (BI) insurance has been developed to protect businesses from loss of profit or revenue, including any additional expenditure incurred in maintaining the business, following an insured loss or damage to property and goods.

Simply replacing the damaged or destroyed property does not replace the profit that would have been earned had the interruption not taken place. BI insurance is designed to cover the gap in income from the time of the interruption to the time business returns to normal.

What are the benefits?

A BI review will establish true risk exposures before any loss occurs so any issues around inadequate or under insurance can be identified and resolved. A BI review will provide:

  • A realistic assessment of possible losses in the event of an interruption
  • An assessment of the adequacy of current insurance protection
  • An accurate basis for negotiation of insurance cover
  • Advice on how the business may be made more resilient to loss

What will the BI review deliver?

  • An assessment of the gross profit at risk (based on definitions in the insurance policy)
  • A brief overview of the IT and communications facilities and the ability to recover them
  • Interdependencies between locations owned or operated by the organisation
  • How well an organisation has prepared for any disaster
  • An estimation of the time taken to reinstate the business to its pre-loss position
  • A financial analysis of additional costs of working incurred during the interruption period
  • A calculation of the potential loss of gross profit and additional costs of working, based on realistic loss scenarios
  • An assessment of the adequacy of insurance cover and any recommended changes to it

Contact us:

For further details please contact your local Willis Towers Watson office.

Business Interruption factsheet:

Case study:

A food retailer with over 350 convenience stores and supermarkets had over 50% of its products flowing through a single distribution centre. The loss of the distribution centre would have a severe impact on the company’s ability to trade.

Following recommendations from the BI review, the organisation signed an agreement with a national distributor to by-pass their own distribution centre in the event of an incident.

The new centre would ensure that the business could continue to trade, re-stocking stores incrementally, reaching approximately 90% of deliveries within 12 weeks; in addition to the other 50% of products already being distributed.

Further benefits were realised as a result of the BI review, including:

  • Areas of loss exposure were better understood and quantified
  • 20% reduction in insurance premiums negotiated
  • Critical assets identified and contingency plans formulated to protect the business
  • Increased awareness in the business of commercial issues surrounding major loss events