1 The Policy, Loss Mitigation & Business RecoveryAngus Tucker March 2016

2 Introduction An introduction from Angus Tucker Managing DirectorLorega Solutions

3 Order of Events Structural and technical issues relating to the business interruption cover. Loss Mitigation Specific Examples Questions and feed back

4 Policy Cover Policy intentions Basic Components of the BI coverPolicy extensions / exposures

5 Intention & Aims To provide financial support for the business following a loss To fund loss mitigation and catastrophe plans To provide continued cash flow for the business To enable the business to demonstrate internally / externally that they are still functional.

6 Policy Components Setting the Sum InsuredAgreeing an appropriate Period of Indemnity Declaration Linked / Average Inception / Renewal issues

7 Sums Insured Gross Revenue / Gross ProfitSetting the correct sum insured Asking the right questions Matching the sum insured with the policy definition Thinking 24 months ahead – Why? Proportional increases for extended indemnity periods

8 Length of Indemnity Period?Customer base Lead times for reinstatement Vulnerability of the Insured business sector Restrictions on loss mitigation / relocation Seasonality

9 Declaration Linked / AverageDeclaration linked has no average Provides limit of 133% of Sum Insured Requires close annual review Premium rebate if over insured Average does not allow any flexibility

10 Policy Extensions Additional increase costs cover (AICWE)Denial of Access Customer extension Supplier extension Failure of Utilities Infectious Diseases etc

11 Business Interruption/RentOccasions when these need aligning Buildings insured for other interests (Directors pension fund, landlord) Formal lease including cessation of rent clause Rent cover exposure

12 3. Mitigating the loss

13 Things to be consideredProperty damage & impact on business Effective use of Increased Costs Business Recovery Focus

14 Early thoughts Loss mitigation needs to start immediatelyIs there a BCP? Will the policy respond, if so when? Effect on BI loss down the line Act as though uninsured

15 Premises Extent of damage Practicality / capacity of alternative sitesOwned or leased (term, break clauses) Public Authority issues – planning, HSE, Environmental Alternative premises – permanent or temporary?

16 Customers Indentifying the customer base for the businessKey customer retention Communications Contractual arrangements

17 Production / Supply Degree of disruption Reinstatement lead- timesTemporary equipment Sub contracting Using other facilities Buy in partially completed Competition

18 Stock What is affected - finished goods, work in progress, raw materials Lead times Buy back from customers Air Freight options

19 Suppliers Communication is essentialPayment for historic and replacement stock Can suppliers assist in recovery plan? Can supplies be brought forward to fill a void? Build supplies into the recovery plan

20 Cash flow Priority for most policyholdersWhy it is important at an early stage? Benefits for both sides Book review / interim payment meetings in advance Support expenditure and agree benchmarks early

21 4. Case studies

22 Case study 1 – fire

23 Summary of case Prestigious West End Restaurant Fire in extract ductKitchen destroyed Restaurant extensive damage Lower ground floor theme bar water and smoke damaged

24 Issues Weekly GP - £60,000 Time critical for reinstatementPotential time for specification and tenders – 3 months minimum Agreed project manager and specialist single contractor for repairs Full transparency – detailed daywork logs

25 Issues Complete strip out within 2 weeksImmediate commencement of repair work Fire occurred 30 July Reopened 28 September 8 weeks – ICW costs circa £60,000 BI saving £1m+

26 Case study 2 – commercial explosion

27 Summary of case Printing machine retailLeased premises corporate landlord Location: Buncefield trading estate Policy cover: machinery/contents, Tenant’s improvements, business interruption. Massive explosion of oil storage tanks

28 Issues Extensive damage to office fit out and stockInitial assessment of building was positive After internal works completed landlord reassessed the building damage Damage to buildings required business to vacate for 6 months

29 Issues Landlord required vacation of building with one months noticeMezzanine ceilings and partitions would have to be taken down and reinstated at tenant’s expense No suitable alternative properties available locally Move away from the area would have resulted in loss of staff and business

30 Case study 3 – laundry

31 Summary of case Main customers P&O Ferries, Hotels, The British ArmyOwn premises located outside Dover Policy cover: machinery/contents, goods in trust, buildings, business interruption Fire destroys entire premises

32 Issues Planning concerns Environmental issuesRetaining contracts with key customers Lead time for replacement machinery Period of interruption could be up to 24 months

33 The Policy, Loss Mitigation & Business Recovery Q&A