Property damage and Business continuity


Execution risks are classified as risks that are directly due to execution of the business activities. Many execution risks are typical business risks and have to be controlled and financed by the company itself.

Specific execution risks which have a similar impacts over all business segments can be insured.
Insurances are an important risk mitigation measure, but they do not prevent losses, nor cover all financial effects (deductibles; limits, exclusion) and other loss impacts as safety, environment and busines distortion.
The Property risk engineering services and solutions of Premium risk engineering focus risk awareness; risk assessment and technical and organisational risk control measures.

Property damage and Business continuity due to business interruption

Risk assessments for Property damage (PD) and Business interruption (BI) of companies have by far the highest risk assessment acceptance and density and this is mainly due to insurers involvement. It is understandable and positive that insurers pay high interest in PD-BI assessments for risk selection and that they mostly inform and support (candidate) policyholders with their overall risk assessment findings including risk improvement advice.

For bigger companies it is important to decide what and how far the role and influence of the risk assessments and risk improvement advice from insurance risk engineering should be. The main reasons for the own review and decision are:
* Insurance are transactions with a contract period of one, or few years and risk control is a continuous process
* New information, assessment opinions and new advice are an enrichment, but should fit in the company (longer term) standard and culture
* Despite the high number of assessments for PD and BI most of them are not quantitative, but quantitative with unknown, or unspecified validation.

The Property risk engineering solutions and services of Premium risk engineering are not only based on a broad practical experience, but are also calibrated by actual loss data and cover both the financial effects and loss impacts beyond insurances.

Lessons learnt from PD and BI losses
Some key findings of extensive loss analyses of Property and Business interruption risks are:
* Split up of loss effect between PD and BI over all (industrial) companies is 50-50, but this ratio varies seriously by industry type
* Fire/explosion is still the main loss impact, but due to influences as natural hazards the predominant role of fire is reduced
* The business type is clearly a differentiator which implies that the hazard grade of this inherent risk is a main condition for the overall PD-BI risk, but the RE Level/ company specific risk conditions are more predominant for the PD-BI risks as they have a twice as high impact than the business activities/ inherent risk.
* Fire protection measures and in particular sprinklers are an effective way to limit the loss extend, but the impact of the own employees and management is even more important. For this reason, there should be a bigger focus on Highly controlled risks instead of (highly) Protected risks unless for occupancies with expected fast fire spreading as distribution centres/warehouses,

* The supply chain has become a major cause for business interruption, but also impacts product and compliance risks, so the resilience management for the supply should cover Property, Product and Compliance.

RAPD Risk assessment for Property damage and Business interruption

The RAPD is a Risk assessment for Property damage and Business interruption and starts with the assessment of the business activities by selecting the appropriate hazard grade for the Basic risk (dependent on combination of process hazards and combustibility of products involved).
The company specific conditions, or RE level comprise of the Processing (activity) Risk and the Risk control measures and are assessed in relation to the Basic risk best practices.

The RAPD comprises of a Core, or a Full format; each their own application.
The Core format is primary for an assessment at high level that requires limited on-site time, or for a Virtual-desk assessment.
The Full format is an in-depth on-site assessment that covers more (>double) risk conditions for Processing and Risk control and includes an extended overview of loss scenario’s plus tailored risk improvement.
The PRA is an effective assessment process that can be implemented with limited preparation time and involvement of few employees of the company-product to be assessed.