Tel. +255 762 100 008 | P.O. Box 173, Arusha – Boma Rd, Clock Tower

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    We design plans to build a “wall of protection” based on your needs. We begin with a thorough risk analysis and evaluation. We then look for the most reputable and the strongest insurer who can offer us the best package in the most cost effective way.

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  • Business Interruption Insurance

    Business interruption insurance (also known as business income insurance) is a type of insurance that covers loss of income that a business suffers after a natural disaster – Fire and Allied Perils. The income loss covered may be due to closing of the business facility or due to the rebuilding process after a disaster.

    i. Loss of Gross Profit as defined in the policy.

    ii. Additional expenses incurred as a result of necessary relocation of the business premises, rental fees, additional transport charges to the new location. an insured peril (e.g. hiring alternative premises)

    iii. Wages (sometimes included with (i) above) paid during an interruption period.

    Basically the policy is the same as fire policy wording ie it covers the same kind of perils, but two important features should be noted:

    i. Property damage warranty: if no valid property insurance claim covers the damage (usually a fire policy), no claim can be made under the business interruption (BI) policy, otherwise it can easily be seen that the interruption period is likely to be greatly extended.

    ii. Policy specification: a very important part of the BI policy are the definition of gross profit ( which has a different meaning from that normally used by accountants) and other terms applicable to the cover.

    The premium calculation is complex, but it begins by using the rate charged for insuring the contents of the building for the fire insurance. This is then loaded according to the time factorinvolved with the cover

    These notes give a very abbreviated summary of a fairly complicated class of bussiness, but the following should be noted:

    i. Alternative names: “business interruption” is the most modern term for this class of business but it may also be called “consequential loss” or “loss of profits”.

    ii. Time element: with fire losses, the most important time is the date of the fire, since the amount of claim will be related to that. With BI insurance the loss is spread over a period after a fire, etc. clearly there must be a limit to this “interruption period” the policy specifies the time limit during which losses may be covered. This may be as short as three months or much longer (even two or more years). The features if individual risks and their ability to return to normal business levels are vital in this area.

    iii. Loss calculation: this is a very complex matter, usually requiring the help of professional accountants. In the essence however an attempt is made to measure the loss sustained during the interruption period by comparing income, etc. during that period with the comparable period last year (when business was not interrupted), making any necessary trend adjustments.