Non-physical Damage Business Interruption (NDBI) cover against drop in occupancy for a group of hotels
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Are you looking for tailor-made insurance covers for your company's intangible assets and business interruption risks? Read here an example of how we developed a Non-physical Damage Business Interruption (NDBI) cover against drop in occupancy rates for a group of hotels.
Background: A real estate company in the hospitality sector was concerned about a drop in occupancy rates in hotels (and thus revenue) due to some external and uncontrollable event. The company needed stable income to underpin its business plans and to optimise operations.
Protection buyer objectives: The buyer was looking for protection against major “black swan” events that would cause a significant drop in room reservations. Research and discussions between the buyer and the insurer identified three such risks: terrorism, a pandemic, and widespread travel disruption.
Risk-transfer solution: The real estate company has bought a multi-year policy with a parametric double trigger. Payment is contingent on the occurrence of a covered peril in the specified territory leading to a drop in demand for hotel rooms according to an independent industry index. The company is compensated for up to 12 months when the index drops below a certain threshold. For each peril covered, an objective trigger has been defined.
Benefits: The appeal of this solution lies in its simplicity. The company gets the protection it desires because the insurer is able to analyse the exposure, identify the underlying factors and assign a value to those factors. In case of a large loss event, the insurance solution contributes significantly to stabilising earnings, and the company receives a formulaic pay-out without requiring elaborate proof of loss.
In our newest sigma 05/17 "Commercial Insurance: innovating to expand the scope of insurability" you can read more examples of innovative insurance solutions we have developed to protect our clients from earnings and cash flow risks.
Your risks are unique. Sometimes you need an innovative solution, not a conventional risk transfer product. At Swiss Re Corporate Solutions, we understand that the traditional market doesn't always meet your needs. That's why we use our risk capital to create smart, creative solutions to the most challenging risks around.
Learn more about our Innovative Risk Solutions.