Unlike traditional business interruption insurance, which covers losses from damage to your own property, CBI typically responds when operations are interrupted because a key supplier or customer suffers direct physical loss or damage.
Common triggers for CBI insurance
CBI insurance is typically triggered by physical damage or disruptions affecting direct Tier 1 suppliers on a property policy. However, in some cases, it may be possible to negotiate a smaller sublimit for Tier 2 suppliers. These covered perils can be grouped into the following categories:
If yes, securing or strengthening your CBI coverage is likely relevant to your business.
Marsh’s supply chain risk management platform, Sentrisk, unites advanced technology, best-in-class supplier data, and deep insurance experience to:
A key feature of Sentrisk is the ability to generate the Supplier+ and Snapshot reports to help improve your insurance submissions, including CBI, property, and property damage business interruption (PDBI). Uncovering more detailed, validated, and up-to-date supplier data can support:
CBI coverage is highly dependent on specific policy terms, including how dependent properties and covered perils are defined. Understanding common coverage gaps is essential to avoid unexpected exposures and ensure your risk transfer strategy is effective.
Many insurance policies often exclude certain triggers, especially non-physical events, which can leave significant coverage gaps. Key examples include:
Coverage generally applies to direct suppliers, which can restrict protection if critical suppliers or facilities are omitted. Consider:
Structural limits and claims requirements can impact recoveries and cash flow. Important factors include:
Contingent business interruption (CBI) insurance protects a business against financial losses resulting from disruptions to key named suppliers. It typically covers lost earnings and extra expenses incurred when these external interruptions cause downtime or operational delays. For example, if a key supplier’s factory shuts down due to a natural disaster, CBI insurance can help cover the resulting loss of income and additional costs while your business is impacted.
Business interruption insurance covers financial losses resulting from damage to your own property that disrupts your operations — such as a fire at your facility causing downtime and lost revenue. CBI insurance, on the other hand, protects against losses caused by disruptions at third-party location critical to your business, like a supplier’s factory. For example, if your warehouse is damaged by a storm, business interruption insurance covers your losses. But if a supplier’s plant shuts down due to a flood, causing delays in your production, CBI insurance helps cover the resulting financial impact.
A dependent property is any third-party location or facility that your business relies on to operate. This includes supplier manufacturing locations, offsite warehouse locations, etc. Dependency is determined by the policy based on whether damage or disruption at these properties directly impacts your business operations or revenue. Essentially, if your business would suffer a loss due to an interruption at these locations, they are considered dependent properties under CBI insurance.
Losses under CBI insurance are typically measured using one or more of the following approaches:
The waiting period, also known as the deductible period, is the amount of time after a covered disruption before CBI insurance benefits begin to pay out. It represents the initial delay during which losses are not covered. Typical waiting periods range from 24 to 72 hours but can vary depending on the policy terms and insurer. A longer waiting period usually results in lower premiums but means your business must absorb losses during that initial timeframe. Understanding and planning for the waiting period is crucial, as it affects when claim payouts start and helps you prepare financially for any uncovered downtime.
As a leading global advisor in risk and insurance, Marsh brings unparalleled expertise to help organizations navigate complex supply chain challenges, informed by detailed analytics about your industry and exposures. Our analytics-led approach maps dependencies and quantifies exposure, informing tailored coverage limits, sublimits, and indemnity.
In the event of disruption, our claims specialists prioritize claims readiness and advocacy, assisting with pre-loss documentation, causation narratives, and BI calculation approaches to reduce friction and speed recoveries. Our end-to-end approach covers risk identification, insurability strategy, market placement, and claims support — helping you improve resilience and financial protection beyond just purchasing a policy.
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Does your supply chain risk tool provide deep, multi-tier visibility and robust supplier data to secure appropriate contingent business interruption (CBI) coverage? Can you stress-test scenarios to understand potential impacts and develop suitable mitigation measures?
Many organizations face hidden risks, or may lack the resources to manage claims and advocate for appropriate recovery in the wake of an event.
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