According to the National Association of Independent Insurers (NAII, Des Plaines, IL), the large number of businesses affected by the Sept. 11 terrorist attacks, combined with the length of time it will take to repair the damages, means that it may take several months before an accurate estimate on business interruption losses can be developed. Because of the wide variety of coverages available and the extended time periods that may be involved, Griffin says, the full cost of business interruption insurance resulting from the World Trade Center attacks may not be known for as long a year.
"Business interruption claims will be among the first to be submitted and paid," says Donald Griffin, director, business and personal lines, NAII. "Moreover, payments for many of these losses will continue for months to come. This is one of the most important ways insurers can help businesses get back on their feet after this terrible tragedy."
The loss figure may escalate over time, NAII says, if telecommunications problems persistparticularly for financial services companiesand "contingent business interruption" losses for those companies not directly affected by disaster mount.
While claims costs for business interruption policies are expected to be significant, NAII does not anticipate any insurer being unable to meet its financial obligations, according to Griffin. The industry is well capitalized and the risk is adequately spread among many insurers and reinsurers, reports the NAII.
"The most important element of business interruption insurance is coverage for lost profits," says Griffin. "Insurance claims representatives work with their policyholders to determine the companies' actual expenses and revenue in order to calculate lost income and pay the claims."
While coverage limits and details will vary from policy to policy, a basic element of business interruption insurance is for extra expenses needed to conduct business in a new location, such as higher rent, equipment costs or site alterations.