Page 35 - Insurance Times June 2024

Business

Interruption

Beyond Physical

Damage Srivathsan Karanai Margan

Insurance Domain Consultant
Tata Consultancy Services Ltd..

BI refers to a situation in which the normal business operations of a company are disrupted or
halted due to unexpected circumstances beyond its control. When business operations are affected,
companies incur significant losses due to the temporary closure of facilities, damaged inventory
or equipment, and other expenses.

inventory or equipment, and other expenses. BI could
Abstract
financially strain a company and impact its revenue,
Business interruption (BI) stands as one of the most
profitability, and ability to meet its financial obligations. As
significant risks encountered by companies. Companies part of the overall risk mitigation strategy, companies
purchase business interruption insurance to mitigate the
purchase BI insurance, also known as business income
loss of profit. BI insurance has traditionally been
insurance or loss of profit insurance.
designed to shield businesses from financial losses
stemming from physical damage to the insured Traditionally, BI insurance has been designed to protect
property. However, in contemporary times, a major BI businesses from financial losses triggered by the total or
incident could arise due to events unrelated to any partial suspension of business operations due to the loss of
physical damage. This article explores the fundamentals use or damage to all or part of a building, plant, machinery,
of BI, delineates how evolving business and risk equipment, or other property, from perils such as fires,
environments are precipitating a seismic shift towards natural disasters, or other covered events. BI insurance
non-physical damage business interruption (NDBI), provides coverage for business income loss and the extra
elucidates the challenges in insuring NDBI, and examines expenses incurred.
how new parametric solutions are revolutionizing NDBI
insurance. Over the years, successive industrial revolutions,
globalization, technological growth, and adoption, and
changing customer behavior have transformed the business
Introduction environment. The risk environment that disrupts businesses

BI refers to a situation in which the normal business has also changed significantly. The confluence of both
operations of a company are disrupted or halted due to factors has resulted in a paradigm shift in the basic
unexpected circumstances beyond its control. When business characteristics of BI.
operations are affected, companies incur significant losses
due to the temporary closure of facilities, damaged In the current landscape, a major business disruption could

32 June 2024 The Insurance Times