From time to time underwriters are requested by Insurance brokers to remove the co-insurance or averaging clause from a Business Interruption policy. This clause is designed to protect insurers from under-declared sums insured for Gross Profit and Payroll, with the consequential impact on an insurer’s premium pool.

The Business Interruption coverage review is an assurance service offered to underwriters to provide an alternative means of protecting their premium pools in circumstances where co-insurance or averaging clauses are endorsed out of a policy.

In return for an underwriter agreeing to the exclusion of an averaging or co-insurance clause from a Business Interruption policy, the insured is required to provide an independent assurance report prepared by Forrisk (Chartered Accountants). The normal arrangement is for the insured to bear the cost of the service.

The report provided by Forrisk is addressed to the Insured as well as the insurer. The procedures undertaken by Forrisk will include:

• that the Gross Profit and Payroll as defined in the policy all entities that are to be insured under the policy have been included in the declared value figures,
• whether a reasonable allowance has been made for future growth of the business
• that the declared values take into account the length of the Indemnity Period,
• that Uninsured Working expenses have been listed
• that the declarations are properly constructed relative to the wording of the policy concerned – for instance if Payroll is insured separately the declared value needs to specify the length of Initial and subsequent periods.