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A BI declared value is the amount used to represent the business interruption exposure declared to insurers. It should reflect the organisation’s expected loss of income, continuing costs, and other insured exposures over the relevant indemnity period.
Why business interruption (BI) insurance reviews matter more than ever
The Middle East war has disrupted global supply chains, with container transit times increasing by eight to 15 days as ships take longer shipping routes to avoid conflict zones. At the same time, energy, freight, and commodity prices have surged sharply. For businesses in Asia, this means that disruptions last longer and cost more due to extended recovery timelines and rising costs.
Reviewing BI declared values and indemnity periods amid this volatile landscape ensures that organisations can make more informed insurance and risk management decisions and avoid underinsurance risk and uninsured losses.
Key benefits of a BI review include:
- More accurate BI declared values based on current revenue, fixed costs, supply chain exposures and recovery assumptions.
- More realistic indemnity periods reflecting repair, reinstatement, and ramp-up timelines after a disruption.
- Improved coverage and renewal discussions supported by a better view of policy wording gaps, average clause exposure, and potential loss scenarios.
How Marsh’s business interruption (BI) review works
Step 1: Review BI declared values
We review the assumptions, calculations, and inputs used to determine business interruption declared values, helping your organisation assess whether your figures reflect current revenue, cost, and supply chain and recovery exposures.
Step 2: Assess policy wording and loss scenarios
Our specialists review policy wording and model potential loss scenarios across risks such as natural catastrophes, fire, supply chain disruption, cyber events and other operational disruptions.
Step 3: Support insurance placement and renewal decisions
Our specialists help strengthen insurance placement and renewal discussions by providing clearer BI declared values, indemnity periods, and loss assumptions, giving underwriters more confidence in maximum loss calculations and supporting capacity, pricing, and coverage discussions.
Case Study: How Marsh discovered a 200% shortfall in business interruption (BI) values at a Japanese manufacturer
A Japanese manufacturing company engaged Marsh to optimise its business interruption insurance coverage and address gaps across its corporate entities.
Before the review, the company’s BI insurance structure did not fully cover all relevant business units, including headquarters and sales entities. This left parts of the organisation exposed to uninsured losses. Existing limits of liability and coverage parameters were also not aligned with the true value at risk.
Marsh’s BI review found that the client’s prior declared BI values were understated by more than 200%. By revising these values to better reflect the company’s exposure, the manufacturer reduced underinsurance risk and improved coverage adequacy.
The updated BI structure strengthened the client’s financial resilience and gave the organisation greater confidence in its risk management programme.
Why Marsh?
Serving enterprises of all sizes and industries, our process leverages the key strengths of Marsh — the world’s largest insurance broker and risk advisor — in the following ways:
- Data-driven insights via an in-depth assessment of BI declared values and loss scenarios, covering a variety of risks including earthquakes, typhoons, floods and fires.
- Extensive claims experience with expertise in claims preparation and advocacy, as well as critical insights into BI coverage requirements.
- Our in-market team of experts in forensic accounting and claims services — comprising forensic accountants, engineers, surveyors, adjusters, legal specialists, and delay analysts with fluency in most local languages — has supported hundreds of clients through declared value reviews, policy wording reviews, loss scenario analysis, and BI training.
- Breadth of expertise that is not limited to property damage or business interruption insurance policies, encompassing delay in start-up (DSU) and cyber policies across all industries.
- Wide geographic coverage with specialised BI experts across Asia’s markets and territories.
- End-to-end collaborative model bringing together the collective strength of Marsh teams in property risk and valuations as well as analytics and claims services to assess risks.
FAQs
The average clause is a policy condition that may reduce a claim payment if the declared business interruption value is lower than the value that should have been declared. In simple terms, the insurer may reduce the claim in proportion to the level of underinsurance. This is why accurate declared values are important before a loss occurs.
Marsh’s review aims to answer key questions such as:
- How long would it take my business to recover from an event?
- Are there gaps in my current coverage and what adjustments (if any) should be considered?
- Do my current internal processes and typical BI worksheet properly capture my risk exposure?
- In the event of damage to my business or to a third party, what is the maximum foreseeable loss (MFL) exposure?
- What is my organisation’s Anticipated Maximum Business Interruption Loss (AMBIL), which considers variables of potential mitigation actions?
The BI process can take anywhere from four to eight weeks depending on the scope.
Risk and insurance managers, operations managers, and financial controllers are usually involved because BI exposure depends on insurance structure, operational recovery assumptions, and financial inputs.
Organisations frequently underestimate business interruption exposure when they rely on outdated assumptions or internal calculations that do not fully reflect current operations, supply chain dependencies or policy requirements.
Common mistakes include:
- Misunderstanding how to calculate accurate BI declared values.
- Setting maximum indemnity periods that may not allow enough time for recovery.
- Interpreting policy wording inconsistently across teams or territories.
- Overlooking internal and external supply chain exposures.
- Failing to test potential loss scenarios before placement or renewal.
A structured BI review helps organisations establish a clearer baseline for values, assess coverage adequacy and identify practical improvements before a claim occurs.
