Do the figures still add up?

Recent events across the UK are a timely reminder that often, less attention is paid to the cover arranged for protecting the revenue and profit streams of business, in particular in setting the sums insured and maximum indemnity period.

With the changing environment, companies should ensure that they take into consideration a wide range of factors when setting their business interruption sums insured. Some key factors are:

• Climate Change and Legislation

As part of the measures to tackle climate change, the government is looking at how best to manage the carbon foot prints of UK business, particularly

Rebuilding and planning guidelines
Major rebuilding following a loss is more likely to be subject to scrutiny and debate regarding the future sustainability of the building.

Protecting the environment
As pressure from local authorities increases to use new designs and materials which are kinder on the environment, building compliance costs can increase which impacts on rebuild times.

• Inflationary Trends

Policyholders need to consider the impact of inflation when setting their sums insured. Production costs and the overall profit margin may be impacted by inflationary pressures. These are caused by global pressures on raw materials, in particular demand arising from China and India, which is impacting on the price of available materials.

• Business Trends and Projections

Businesses can be subject to seasonal peaks and troughs in their trading. Some may need to build up stocks and this should be considered when setting sums insured and indemnity periods, thereby ensuring that enough time is allowed to rebuild buffer stocks and realign to business trading cycles.

• Realistic Length of Maximum Indemnity Period

Many companies choose Indemnity Periods based on the assumption that if an incident occurs, any interruption will be short and the Company will be back up and running quickly. It is often assumed that machinery, buildings and stock will be replaced quickly and that customer bases will remain loyal.

The reality in many instances is that many premises and/or machinery may be custom built, or difficult to source. Rebuild times may run over and temporary accommodation may not be suitable. Customers will switch to new suppliers and may prove difficult to win back.

If a major disaster has occurred, such as the recent floods, services such as builders/contractors may be in short supply and 'surge demand' could have a substantial impact on reinstatement times.

For a significant number of occupations today, indemnity periods of less than 24 months are no longer appropriate when considering worst case scenarios and can result in the business exhausting its cover at a critical point in its recovery phase.

Companies never stay static.

So, do your figures still add up?

For assistance with Business Continuity planning, please contact our NURS Helpdesk on 08453 666666*

For assistance with Policy alterations, please talk to your account manager.

*For our joint protection calls maybe recorded and/or monitored.