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Japan: Technical Note On Supply Chain Consideration
Thursday, 17 March 2011
Insight Press Release

17.03.2011 Technical Note On Supply Chain Consideration

 

This Note addresses the concerns over the supplier extensions under property business interruption covers following the unfortunate earthquake and flood in Japan on 11 March 2011 where our thoughts and prayers are with the people of Japan.

 

Supplier Extensions Supplier extensions equate Damage at the Premises of a Supplier with Damage at the policyholder’s own Premises.

 

This dispenses with the need for the Material Damage Proviso to be satisfied and triggers Business Interruption cover.

 

The range of Insured Perils may be different from the commercial combined cover and may not be written on an all risks basis; earthquake in Japan may be a specific exclusion.

 

The cover is likely to be more restrictive than the cover at the Premises.

There may be geographic cover limitations.


Two forms of extension are commonly available, relating to Specified and Unspecified Suppliers.


Specified Suppliers Some businesses will have arranged for cover extending to specifically named suppliers.

 

The cover available will typically be higher than for the general pool of Unspecified Suppliers, and will be expressed as a separate Limit of Indemnity.

 

Potential loss arising from these covers is likely to be identified fairly quickly – the fact that a

Supplier has been specified is indicative that it is important and its status will probably be prominent in the minds of the insuring customer.


Unspecified Suppliers Many commercial combined policies offer cover for Unspecified Suppliers, either as a percentage of the overall Sum Insured (typically 10%), or a monetary limit (say, 100K).

 

This cover may not have been requested by the policyholder, but may have been given by Insurers as a free addition in some cases.
 

If so, policyholders may not be aware that they have this cover.

 There is the consequential potential for there to be a raft of Supplier Extension claims being made some months down the line.


The fact that companies will order well in advance to allow for the shipping time means that the impact may be delayed, exacerbating the potential for delayed claims.


vrs Adjusters have set up a Supplier Extension global team to ensure consistency in the handling of these losses.

 

The following members from vrs Asia Pacific are available to assist with any general enquiries :-

 

Mr Nehemiah Neo:
Tel No. : + 65 6223 2008 / Mobile : +65 9818 7238
E-mail : [email protected]

 

Mr Joshua Khiu:
Tel No. : + 65 6223 2008 / Mobile : +65 9818 6262
E-mail : [email protected]