Some products specify locations
that, if hit by a catastrophic event, will
result in lost revenue for the insured.
For resorts or large entertainment
complexes, for example, attacks on
nearby airports could cause significant
loss of revenue and could be covered
by NDBI insurance.
Measuring losses is a challenge,
and underwriters may demand steep
retention levels. According to Parker,
excess coverage may kick in after a 20
percent to 25 percent revenue drop.
Insurers will also want proof that
the drop is related to the catastrophic
event rather than economic downturn,
seasonal variances or other factors.
“Capacity is very large for direct
acts of terrorism but lower for indirect
terrorism and violent acts because
the exposure is far greater,” said Joey
Sylvester, national director of operations
& planning, Public Sector, Gallagher.
“Commercial businesses, public
entities, religious and nonprofit
organizations have various needs for
this type of coverage, and the appetite
is certainly trending upward.”
It is difficult to foresee which
events will cause business disruption.
As a result, according to Nusslein,
companies generally prefer to purchase
all-risk NDBI covers rather than
“The main reason is that, if they
have coverage for four potential NDBI
events and a fifth event occurs, the fifth
event is not covered,” he said. “Insurers,
new to NDBI covers, still prefer
named-perils covers over all-risk cover.”
Current geopolitical tensions are
also fueling buyers’ demands.
“Many companies want nuclear,
biochemical, chemical and radiological
exclusions removed from terrorism
NDBI covers. While this is more
difficult for insurers, it is not
impossible,” Nusslein said.
“War risk NDBI cover is becoming
more sought after due to political tensions
between the U.S. and North Korea.”
Natural catastrophes still constitute
the largest share of perils underlying
NDBI products. Parametric indexes
are increasingly employed to provide
uncontroversial triggers to policies, said
Duncan Ellis, U.S. property practice
These indexes range from rainfall
levels and wind speed to the measured
intensity of earthquakes. Interest in this
kind of NDBI coverage expanded after
the recent hurricane season.
“The benefit of these products is
that you do not have to go through the
settlement process, which clients hate,”
NDBI policies are often bespoke,
which is more common for very large
“Usually, the market offers bespoke
coverages for individual industries
or clients, with very significant
deductibles,” said Tim Cracknell,
partner, JLT Specialty.
NDBI cover can also help transfer
regulatory and product recall risks.
The life science sector is expressing
interest in this kind of solution for
cases where a supplier goes bankrupt
or is shut down by a regulator, or a
capacity provided by a lead insurer,
with syndicated capacity to other
insurers and reinsurers, depending on
the risk. &
RODRIGO AMARAL is a freelance writer
specializing in Latin American and
European risk management and insurance
markets. He can be reached at riskletters@
medication needs to be recalled due to
perceived flaws in the manufacturing
Experts say that concerns still to be
addressed are NDBI losses caused by
cyber attacks and pandemics.
Capacity is an ongoing concern.
According to Swiss Re CS, $50
million to $100 million, or even more,
can be achieved through foundation
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