Boston Bomb Boosts Business Interruption Losses

The devastating effects of the Boston Bombs, detonated on the 15th April 2013, will surely remain in our minds for ever.

No-one can fail to have been moved to despair at the sight of the attendant crowds running for their lives and the subsequent horror of the aftermath. Our thoughts are with the families of those killed or injured.

The destructive force of the bombs caused damage to many of the local properties and this has seen insurance claims being filed for property damage losses. Risk modelling firm Risk Management Solutions estimates that the property damage losses may amount to $1,000,000 (£656,000). Not as much as you might have thought considering the scale of the blasts.

Business Interruption Claims

What is likely to generate larger claims is the resultant interruption that has been caused to businesses in the area. According to RMS, most of the property damage was between 10ft and 20ft of the explosions. However, a large area across Boston was off limits to all but law enforcement officials for several days after the blasts.

Many businesses and hotels were closed and access to other businesses was severely hampered by inaccessible roads.

Under most Terrorism policies, business interruption losses from restricted access and closure by civil authorities is triggered by physical damage arising from an insured peril in the designated area. However, the damage need not occur to the insured premises specifically.

The extent of the claims for business interruption losses (loss of revenue, profit or additional and increased costs of working) have not been estimated but they are likely to be substantial.

RMS catastrophist Gordon Woo considers that insuring other sporting events is likely to be affected by the events at the Boston marathon.

The shortage of terrorism insurance cover in the years after 9/11 led to the securitisation of the cancellation risk of the 2006 World Cup. So while the property insurance loss is small, the Boston Marathon bombing may well have a significant influence on terrorism insurance

These events highlight the importance of arranging adequate Business Interruption insurance for every business. Events not directly connected to your own business can have a serious effect upon the business in terms of lost profit, increased costs and reduced revenue. Further, cover for acts of terrorism such as the Boston Bombings, are not normally covered under business policies with most insurers having removed the cover following 9/11. Separate terrorism cover can be purchased if a business feels exposed to those risks.

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