Blog Question – Customers/Suppliers Extension

I received this question:

Hi Allan,

I was recently referred to a prospective new client who is a high end Carpet wholesaler/manufacturer but has all the manufacturing done by a Third Party company locally based. They rely on this company pretty much for the continuing survival of their business in its current form. I know the AIMS ISR policy provides cover via endorsement and sublimit for this but am I right in thinking that should the TP suffer an insurable loss, then only the sublimit would be triggered? Is there any way of a Third Party loss triggering their full BI cover? (which they do not currently have might I add!!!) Do I just totally beef up the sublimit??

PS – nice article in the Insurance NEWS !!!

Anne [Surname and email provided]

I replied as follows:

You are right to consider the supply chain risk. It is extremely real as the spate of recent natural disasters in Australia, New Zealand and Asia have clearly demonstrated.

Australian Business Interruption policies typically have a 20% sub-limit for unnamed suppliers and or customers. This is what most underwriters are comfortable with without gaining a better understanding of the risk posed by an individual supplier or customer.

This can be changed by endorsement and depending on the exposure, the insurer may require to survey the supplier’s premises if they are not familiar with it to ensure that the exposure is not greater than the primary risk.

You need to explain all the issues to an understanding underwriter who should with a named supplier, subject to it being an acceptable risk be able to insure with a 100% sub-limit.

Good luck with it.

Regards

Allan

 

One response to “Blog Question – Customers/Suppliers Extension”

  1. Red says:

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