Business interruption insurance for multinational companies through Chubb
With production or storage in several countries, not only the risk differs per location, but also what you are allowed to insure there and in which currency payment is made.
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In brief
In an internationally structured programme, alongside the Dutch master policy there is a locally issued policyin a number of countries, because those countries do not permit insurance by an insurer not licensed there. We describe the liability side of that structure under the liability insurance for multinational businesses. This page is about damage to property and standstill: which loss arises where, and who pays it.
The first task is the declaration of values per site: buildings, machinery, stock and the annual output attaching to that location. From that, insurers calculate the largest conceivable loss from a single event, and that scenario drives the limits of the whole programme. If your production is concentrated in two factories, that is more decisive than your worldwide turnover. For each location it is then established how long recovery there realistically takes; that period can differ greatly by country because of permits, importing machinery and the availability of contractors.
The second task lies in the framework conditions. Payments in foreign currency are converted at a moment fixed in the policy, which makes a difference on a long-running loss. Each local policy carries its own insurance premium tax that has to be paid in that country. And every programme contains a sanctions clause: if a country or a party is subject to sanctions, the insurer may not pay, whatever the cover. Test those points before you open a site, not afterwards.
This page deals with one situation. The full overview is on Compare business interruption insurance.
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What to look out for
Four subjects that make the difference in cross-border standstill.
Natural catastrophe carries limits by region
Earthquake, flood, hurricane and tropical storm are not ordinary insured perils but separately capped sections, with excesses of their own that are often expressed as a percentage of the value. In exposed regions capacity is limited and sometimes available only on demanding terms. Work out what share such a site has in your total production before you agree to a sub-limit.
Standstill elsewhere in your own chain
If your factory in one country supplies semi-finished products to assembly in another, damage at the first location brings the second to a halt. That is called interdependency and has to be expressly built into the programme, with the flows between sites named. Without that, the policy pays only the loss at the site affected and not the loss that follows further along.
Customs, imports and repair at a distance
Recovery abroad runs into different obstacles from those in the Netherlands: import duties on replacement machinery, local building regulations and the availability of specialist engineers. Additional costs caused by changed local laws and regulations are not covered automatically and call for a separate provision. Include the travelling time of your own engineers in the estimated recovery time.
What the programme does not cover
Excluded are war, insurrection and political violence, for which a separate cover exists, damage with a cyber cause, government measures and border closures without material damage and currency loss itself. Penalties and contractual compensation payable to customers also stay outside this policy.
What does your premium depend on?
- Number and location of the sites: exposure to natural catastrophe by region
- Concentration of value: the largest conceivable loss from a single event
- Interdependence: how many locations can bring each other to a halt
- Number of local policies: each policy brings its own costs and tax
- Indemnity period per location: recovery time differs greatly by country
- Level of prevention at the weakest location: that often sets the terms for the whole
Insurers weigh these details differently. That is where your saving is.
What is covered
| Situation | Dutch primary policy | Local policy |
|---|---|---|
| A fire brings your factory in Romania to a halt for three months | Provided that | Yes |
| The loss in Mexico exceeds the amount insured there | Yes | No |
| A strike shuts down the French site for a week without anything being damaged | No | No |
| The payment for the Indian subsidiary has to reach the account of the Dutch parent | Provided that | Yes |
| A site in a country subject to sanctions burns down | No | No |
| Your main supplier in Italy burns down and your lines come to a halt | Provided that | Provided that |
Not only the risk differs by country, but also whether cover has to be arranged locally and to whom payment may be made.
Frequently asked questions
This is what people ask us most.
Why can I not simply put my foreign factory on the Dutch policy?
In some countries a locally established company may be insured only by an insurer licensed there. If you do not do that, the policy is formally invalid there and the local management can face a fine or a tax problem. In countries where it is permitted, the site can be added to the Dutch policy.
In which currency is payment made?
Usually in the currency of the policy under which the loss falls, with conversion at a moment set in the conditions. On a loss running for eighteen months the rate can move considerably. Record which rate applies and who carries the currency risk, and bear in mind that local repairs are paid in local currency.
Does the same indemnity period apply for all countries?
It can, but that is rarely sensible. A hall in the Netherlands is rebuilt sooner than a factory where building permits take longer or where installations have to be imported. It is wiser to establish per location how much time full recovery takes and to let the longest period govern the programme.
What does a sanctions clause do to my cover?
It provides that the insurer will not pay where doing so would conflict with sanctions legislation. That can concern a country, a trading partner or a specific transaction. Because sanctions lists change, a site that is insurable today may not be next year. Take this into account in decisions about new markets and keep the list of insured entities up to date.
Every situation is different. For these situations we have a separate page.