Business Interruption Beyond Physical Damage

The purpose of NDBI insurance coverage is to offer financial protection to businesses when their operations are interrupted or suspended due to non-physical loss or damage. Like traditional Bl insurance, NDBI insurance covers a broad range of losses, including loss of income, extra expenses, loss of property or equipment use, loss of market or reputation, and loss of key employees.

- Srivathsan Karanai Margan

Insuring NDBI

The purpose of NDBI insurance coverage is to offer financial protection to businesses when their operations are interrupted or suspended due to non-physical loss or damage. Like traditional BI insurance, NDBI insurance covers a broad range of losses, including loss of income, extra expenses, loss of property or equipment use, loss of market or reputation, and loss of key employees. In the globalized business environment, just as BI expanded to include contingent BI, NDBI is also evolving to encompass contingent NDBI. Contingent NDBI provides financial protection to businesses if their operations are disrupted or suspended due to non-physical loss or damage to suppliers, customers, or other third parties. However, there are significant challenges in providing protection for NDBI.

Challenges in Insuring NDBI

BI insurance is considered complex for several reasons,including the wide range of perils it covers, complex policy wording, interconnected risks with other insurance coverage, and the challenges involved in assessing losses. NDBI risks, being intangible in nature, are even more complex and difficult to identify, predict, underwrite, price, or manage. Some of these challenges (see Figure 3) are outlined below.