Page 52 - Policy Wording - Hollard Business Binder (2020-08-26)

Business Interruption
1. GENERAL
BUSINESS INTERRUPTION
1.1 This section provides cover for loss of income following loss or damage to specified property by an insured peril stated under the material damage sections of the policy and should not be issued on a stand-alone basis.
1.2 Material damage classes applicable
a) Fire;
b) Building Combined;
c) Office Contents;
d) Electronic Equipment (fire perils only)
e) Accidental Damage (only up to the AD sum insured);
f) Theft (only up to Theft limit);
g) Any other material damage insurance covering the interest of the Insured.
1.3 Indemnity period
1.3.1
Assuming a 'worst case' scenario, where business is interrupted due to damage, estimate the maximum period (in months) it would take for turnover to return to its pre-damage level by taking into account:
1.3.1.1 tendering/replacement/rebuilding time of machinery/buildings/complexes, etc.;
1.3.1.2 delivery/re-ordering/construction/installation time for plant/machinery;
1.3.1.3 recovery time to normal production capacity;
1.3.1.4 recovery of market share, regaining market;
1.3.1.5 council permission and connection of services.
NB: Cognizance should be taken of planning, delivery, installation delays and time to recruit/ retrain staff.
Calculating the rate
1.3.2.1 A conversion factor is applied to the underlying material damage rate based on the indemnity period selected.
1.3.2
3 months
6 months
9 months
12 months
18 months
24 months
1.3.3
1.3.2.2 Conversion table:
60% 12 months
70% 12 months
80% 12 months
90% 12 months
75% 18 months
70% 24 months
Notes on annual gross profit
R750
R1 000
R1 300
R1 750
R2 000
R2 500
Indemnity period
% of Fire rate
Sum insured equivalent of
Minimum annual premium
1.3.3.1 Where an indemnity period of 12 months or less is selected, the annual Gross Profit/ Gross Rental/Revenue sum insured must still reflect the full 12 month limit;
1.3.3.2 If the indemnity period selected is more than 12 months, the limit must be proportionally increased. For example, an 18 month indemnity period – sum insured must be 1.5 times the annual limit.
Commercial Underwriting Mandates and Guidelines – Binder – Version 2 2020 51