Business Interruption Insurance Claims Hong Kong

When starting a business, most company founders focus on the positive side of running a business and push the negative side far back. They are right; an entrepreneur needs to be positive.

Unfortunately, the negative side and risks don’t just disappear. As soon as one starts a  business, it is essential to understand these risks and have unique protection or plans to face them.

One of the risks includes business interruption risk. Business interruption cannot be controlled and has an awful impact on the company. A business interruption is when a sudden unanticipated event forces a business to shut down temporarily and pause all business activities.

The interruption period is usually when the business tries its best to deal with the unfortunate event and recover. However, the company will have to deal with the financial loss due to rent, salaries and other ongoing expenses. Just because the business is on pause doesn’t mean its expenditures will waver.

For this reason, many businesses purchase business interruption insurance to be prepared for the worst. The article will discuss what interruptions can force your business to pause and why this insurance is critical (to all industries). 

What Is Business Interruption Insurance?

Business interruption insurance is a policy that covers and reimburses income lost following a disaster. It allows business owners to focus on rebuilding and resolving the problem.

The insurance will reimburse costs such as rent, income, salaries, and other additional expenditures. Almost like the business interruption never happened – these costs will be calculated according to the previous months.

In addition, business interruption insurance typically comes as an extension to property all-risk insurance. However, it can be an extension to any business insurance to protect against unwanted interruptions.

It is also crucial to understand this insurance will not cover any pandemic or epidemic interruptions.

Business Interruption Causes:

Fire Interruption

One of the most dangerous causes of interruption claims is fire. The most common causes of fires are cooking equipment, heating equipment, electrical and lighting equipment, or intentional fire setting. A fire can damage any business that works in the office or on-site.

Business interruption Fire Hong Kong- F&B Industry

The most common place of fire is in the food industry. One slip can turn a cooking fire into a property fire. The pause can completely cut off income for months and ruin the business. For example, in Hong Kong 2020, a Nepali restaurant caught fire, and the fire burned all property. They had to shut down till repaired – Unfortunately, they did not have the funds to repair due to the interruption.

Businesses must purchase business interruption insurance to avoid interruption financial loss from fire damage. The insurance will reimburse any loss of income and interruption costs. Therefore it helps the business focus on rebuilding burnt or damaged property to relaunch.

Flood Interruption

Flood interruption claims are similar to fire, not as dangerous to touch but as disastrous to the business. A flood can be caused by burst pipes, taps left on or heavy rain. Floods can also occur anywhere from restaurants, retail stores or commercial offices. Flooding can damage the building, fixtures, products and expensive equipment – causing business interruptions and a downturn in profits. 

Business Office Flooded Hong Kong

The damages may take months to recover from and cause the business a large amount of financial loss. For example, a retail store may be forced to close for months when a water tap explodes, damaging all their products and electronic goods. In addition, the store will still be responsible for paying rent and staff salary, causing them to lose money for months.

Flood interruption will also be covered by business interruption insurance. The insurance is the right solution to help the business move on from the unfortunate event due to financial support. In addition, the insurance allows the business to pay its necessary bills and not compromise its future financial plan.

Cyber Attack Interruption

Cyber attacks are one of the most common dreads in all businesses. Especially when companies are dealing with sensitive data or even providing their services online. A cyber attack is one of the factors that will force a business to pause its activities to deal with the cyber threat. The business interruption is necessary as the company must protect their data and may lose control of its website.

cyber threat- ransomware

A cyber attack can force a business to temporary shut down to keep the attack retained. For example, recently, A Top U.S. fuel pipeline operator Colonial Pipeline’ was forced to temporarily shut its entire network after a ransomware attack. The business explained they had to shut down to understand and resolve the issue. As a result, they lost millions of dollars as they were the source of nearly half of the U.S. East Coast’s fuel supply.

Business interruption insurance will also cover intangible interruptions like cyber threats. The insurance is a perfect extension of cyber insurance. While cyber insurance helps deal with the attack itself. While business interruption insurance will cover the income loss due to the business pause.

Natural Disaster Interruption

Natural disasters are unforeseen; a slight bit of rain can turn into a massive storm. There is various natural disaster than can affect each country. They destroy everything in the way, including business property. Like fire or flooding, the business is forced to pause to rebuild when the business property is heavily damaged. Property damage is already costly enough to recover from, but the interruption would worsen the financial loss.

Natural disaster Hong Kong destroys business

Natural disasters can include storms, hurricanes, tsunamis, earthquakes or forest fires. Any of these disasters can destroy a location and the property around it. For example, the recent heavy rain all around south-east asia has caused severe flooding damage to many stores, forcing them to shut down. Hence they gain no income from paused months, making it harder to relaunch.

Natural disasters are horrible to deal with, but the combination of property all risk and business interruption insurance will make it easier to bounce back. In addition, combining both insurances will help solve most natural disaster financial problems, from income loss to property damage costs.

How Can Business Interruption Insurance Save A Companies Future?

Business interruption insurance is essential when starting a business, especially in certain industries. As mentioned,  business owners can purchase the policy with property all-risk insurance – to get comprehensive protection against interruption risks. The combination of these insurances will avoid substantial financial losses and provide peace of mind when moving forward.

The financial safety avoids a complete business shutdown, as repair costs and income loss may be too much. Therefore, the business can fix everything and focus on relaunch without stress.

However, business interruption has a deductible based on days of interruption. Typically most policies will not cover the first hours/days of business interruption (depending on the specific policy). Therefore, this insurance’s primary purpose is to support a company when facing big catastrophes, not for minor damages. For example, if a toilet flood closes the business for 1 day, the insurance will not cover the income loss.

Business interruption is uncontrollable, but you should be at least protected and prepared to face the worst as a business owner.


To Learn More about business interruption insurance in Hong Kong and Asia, contact Red Asia Insurance.