April 12-14, 2010 Sheraton New Orleans Insuring Continuity Integrating the BC Program with Traditional Insurance

April 12-14, 2010 Sheraton New Orleans Session Objectives Discuss types of insurance relevant to BCM programs Demonstrate how BCM can benefit from insurance programs Demonstrate how insurance programs can benefit from the BCM program

April 12-14, 2010 Sheraton New Orleans Insurance Overlap with BCM Business Interruption Property Directors’ and Officers’ Workers’ Compensation/General Liability Professional Liability

April 12-14, 2010 Sheraton New Orleans  Business Interruption Defined:  Thesaurus Legend: Noun 1. business interruption insurance - insurance that provides protection for the loss of profits and continuing fixed expenses resulting from a break in commercial activities due to the occurrence of a peril  Business Interruption Purpose: To protect the earnings of the insured and do what the insured would do for itself had no loss occurred.  Business Interruption: “Net Profits Plus Continuing Expenses” or “Gross Earnings less non- continuing expenses” Business Interruption Insurance

April 12-14, 2010 Sheraton New Orleans Services Overview Section 1: BI Program Design Direct Exposures:Indirect Exposures:  All Risk/Other  Extended Period of Indemnity  Extra Expense  Ordinary Payroll  Contingent Business Interruption  Contingent Extra Expense  Civil Authority  Ingress/Egress  Professional Fees  Service Interruption  Dependent property Business Interruption Coverages

April 12-14, 2010 Sheraton New Orleans Services Overview Section 1: BI Program Design  Types of policy forms  ISO Filed Forms  Manuscript/Broker Tailored Form  Propriety/Insurance Company form  Basis of coverage:  Gross Earnings: “Gross Earnings less non-continuing expenses” or  Net Profits: “Net Profit plus continuing expenses” or  “Reduction in Turnover less change in standing charges.”  Conditions:  Covered cause of loss  Covered location  During period of indemnity  Mitigation  Actual loss sustained Business Interruption Basics

April 12-14, 2010 Sheraton New Orleans Services Overview Section 1: BI Program Design

April 12-14, 2010 Sheraton New Orleans Insurance can help BCM Cash to implement strategies –At time of disaster or execution portions of staged strategies –Contingent coverage Current risk information –Basis for MFL/PML –Exposures revealed in BIV analysis

April 12-14, 2010 Sheraton New Orleans Insurance can help BCM Backstop for losses/failed responses Strategy Funding Self Insurance Excess/Reinsurance Deductible

April 12-14, 2010 Sheraton New Orleans BCM can help insurance What doesn’t work: Putting insurance salesmen in your mass notification system

April 12-14, 2010 Sheraton New Orleans Services Overview Section 1: BI Program Design  Earnings loss scenarios which may not be covered by business interruption insurance (sample): 1.Obvious exclusions (strikes, war, flood, etc.) 2.Obscure exclusions (loss of market, no physical damage, consequential losses, etc.) Examples:  9/11 losses with no physical damage  Katrina losses – effects on population vs. damage (market)  Northeast power blackout of 2003  Offshore property exclusion  Pandemic  Human impact, Loss of Life BCM can cover BI “Gotchas”

April 12-14, 2010 Sheraton New Orleans Services Overview Section 1: BI Program Design  Earnings loss components which may not be covered by business interruption insurance (sample): 1.Obvious exclusions (BI loss stemming from - mold, flood) 2.Obscure exclusions (loss of market, retraining employees, consequential loss, etc.) Examples:  Pre-loss excess labor to expedite goods production in advance of loss  Mitigation expenses incurred but not utilized  Excess fuel costs stemming from Katrina  Disaster bonuses, employee tips  Broader market impact  Excess bad debts stemming from Katrina BCM can cover BI “Gotchas”

April 12-14, 2010 Sheraton New Orleans Actual Example of BCM helping Insurance Location Product 1 Product 2 Product 3 Product 4 Product 5 Product 6 Product 7 Total Ref Schedule Loc 1 $ 23,216 $ 1,497 $ 11,184 $ 7,492 $ 17,180 $ 38,269 $ 137,057 $ 235,894 Loc 2 $ 29,961 $ 17,816 $ 4,698 $ 23,733 $ 3,312 $ 3,124 $ 7,678 $ 90,321 Loc 3 $ (3,554) $ 2,303 $ - $ 397 $ - $ 3,791 $ 2,937 Loc 4 $ 34,464 $ 14,181 $ 88,369 $ 36,849 $ 14,949 $ 11,732 $ 37,098 $ 237,641 Loc 5 $ 1,475 $ - $ 1,475 Loc 6 $ - $ 13,602 $ - $ 13,602 Loc 7 $ 22,147 $ 5,657 $ (328) $ 580 $ - $ 342 $ 3,392 $ 31,791 Loc 8 $ - $ 27,383 $ - $ 27,383 Loc 9 $ 173 $ 1,570 $ 5,908 $ 1,467 $ - $ 468 $ 3,333 $ 12,918 Loc 10 $ - $ (128) Loc 11 $ - $ (2,774) $ - $ (2,774) Group $ 5,634 $ - $ (3,160) $ - $ 2,474 All Other $ (6) $ (24) $ (2,144) $ 2 $ 1,308 $ (1) $ (866) Adjusted $ 34,464 $ 17,816 $ 88,369 $ 36,849 $ 17,180 $ 38,269 $ 137,057 $ 370,004 Prior $ 113,510 $ 56,602 $ 129,136 $ 70,520 $ 36,749 $ 53,933 $ 192,220 $ 652,669

April 12-14, 2010 Sheraton New Orleans You know you might need a professional BIV if… What to include as a deduction for purpose of getting to gross earnings –(avg. daily value deductible or co-insurance reporting) The policy has location based limits based on the BIV worksheet Extended interruption is a possibility for some locations

April 12-14, 2010 Sheraton New Orleans QUESTIONS? Contact me at: Michael Keating, CBCP LinkedIn: