Aon says most BI policies only kick in when there is physical damage

Typical business interruption (BI) insurance policies won’t respond to the disruption to airspace caused by the volcanic ash cloud, according to Aon Global Risk Consulting chief executive Stephen Cross.

“Business interruption policies usually only kick in when there is physical damage,” he said. As of yet European authorities have not reported any dangerous fallout from the volcanic ash cloud, which spilled from the Eyjafjallajökull volcano in Iceland.

Flight restrictions over Europe have only just been lifted following a major eruption on Wednesday, April 14. This followed sharp criticism from the airline industry that the flight ban was overly cautious.

If ash does fall and lands on a business’ premises causing damage then that could trigger a business interruption claim, added Cross. “It is important to note, however, that insurance policies vary and a firm should always ensure they study their own policy language in determining whether they are able to claim on their insurance cover.”

The insurance industry has recently developed business interruption products that do not require a physical damage trigger.

To read more of Aon’s advice on the business implications of the ash cloud click here

To read business continuity supply chain and insurance advice from Marsh click here