"Business Interuption Insurance can provide income or allow your business to be set up in a temporary location to earn income. Many clients still believe that everything is covered under the standard commercial package policy. Here is an article from Insurance Journal that reminds us of its importance." Cliff Cottam Insurance Services
March 16, 2011
The human, social and economic devastation in Japan from the massive earthquake and tsunami is overwhelming and business losses are just beginning to be tallied.United States companies that purchase products or supplies from Japanese companies or have operations in Japan have a bumpy road ahead of them and business interruption coverage could be critical to helping these businesses getting back on their feet.
"It's inevitable that there will be hundreds of millions of dollars of losses to American companies for sure," said Finley Harckham, senior partner for Anderson Kill & Olick, a law firm in New York
Harckham says businesses are now trying to figure out how long the disruption will last and if they have adequate inventory to cover that time period, which should all become clear in the next couple weeks.
"The companies that are going to be affected pretty much know it now but the question will be what is the scope of the losses rather than whether there will be losses," he said.
It is too soon to know what the reaction from the insurance industry will be to this event in terms of a hardening market or a pullback of capacity for business interruption coverage, says Pam Ritz, president of Risk Specialty Agency, but insurers are going to be extra careful in the coming months.
"It will be about 30 to 60 days before everyone realizes what the overall financial impact of the earthquake is, but I do think we will see insurers being very cautious in those 30 to 60 days," she said. "There are a lot of renewals coming up in April in regards to worldwide reinsurance and they will be affected by Japan."
U.S. companies should also check their policies to make sure their business interruption coverage protects them in the event of an earthquake or other event like a tsunami.
Insurance experts agree that the biggest challenge when it comes to business interruption is educating clients on why they need the coverage.
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