Industrial Special Risk Insurance

ISR Insurance (Industrial Special Risk)

Industrial Special Risk policies, also known as ISR Insurance, provide Property and Business Interruption or Consequential Loss coverage for clients with assets generally greater than $5,000,000 or with assets in multiple locations.

The policy is popular for medium and larger business due to its flexibility and the ability to tailor the coverage more specifically to the needs of the client.

The ISR is a complex policy compared to standard business policies due to having clauses and endorsements that are highly technical within the policy. An ISR policy will be tailored to reflect the requirements of individual businesses and will typically have multiple endorsements and alterations to ensure that the appropriate coverage is in place.

A huge number of industries utilize ISR policies. These can range from Mining, Energy and Infrastructure, Major Retail, Office Towers, Strata Title, Shopping Centres to business operations with locations scattered throughout Australia.

What does an ISR policy cover?

An ISR policy protects the Declared Assets noted in the Policy Schedule.

The Declared Assets are separated into two sections, and normally provide values for:

Section 1: Material Loss or Damage
  • Buildings
  • Contents
  • Stock
  • Removal of Debris
Section 2: Consequential Loss
  • Gross Revenue/ Profit/ Rent
  • Additional Increased Cost of Working

It is important that these physical assets have full current replacement value. The Consequential Loss figures need to be calculated correctly as insurers can apply under-insurance and only pay a proportion of the loss.

What are the various sections of an ISR policy and how is it structured?

An ISR policy has various sections which are summarised below:

  • Policy Schedule providing Insured Legal Entity Name, Policy Period, Maximum Policy Limits, Sub-limits, Declared Value Amounts, Deductibles, Endorsement Headings
  • Preamble
  • Operative Insurance Clause (Insuring Clause)
Section 1: Material Damage
  • The Indemnity
  • The Property Insured
  • Basis of Settlement
  • Memoranda
Section 2: Business Interruption
  • The Indemnity
  • The Property Insured
  • Basis of Settlement
  • Memoranda
All Sections
  • Peril Exclusions
  • Property Exclusions
  • Memoranda
  • Endorsements
  • Conditions

What are benefits of an ISR policy?

ISR policies provide coverage for any physical loss or damage other than what is excluded or limited.

This means that an ISR policy is extremely broad. Due the large material and financial losses that can occur with these policies, we recommend an experienced insurance broker be involved when discussing your ISR cover with insurers.

The potential benefits for this policy are wide, and can include coverage being extended to include loss of income due to damage to your customers or suppliers premises, Loss of Land value, and even additional costs for undamaged sections of building to meet current building standards imposed following damage to the other side of the building.

What exclusions does an ISR policy have?

The standard exclusion in an ISR policy can be categorised as either Property or Peril exclusions.

Examples of standard Property Exclusions are:

  • Railway Rolling Stock
  • Live Animals
  • Property in Open Air
  • Growing Crops

Example of standard Peril Exclusions include:

  • Machinery Breakdown
  • Flood

These exclusions can be amended or written back, meaning the exclusion is deleted from the policy - subject to the Insurer's agreement of course.

Claims Experience of ISR Policies

Some of the largest property and consequential losses in Australia have been settled under ISR Policies. The mining sector, due to their major operations and output, have seen major incidents such as floods filling mine pits, where losses have been in the hundreds of millions.

We assist with in-house and external experts where required, all our clients in handling and negotiating ISR claim settlements with insurers.

History of ISR Insurance Policies

ISR Insurance was developed in the late 1980’s in Australia and has undergone several revisions over the time. The industry has in general used, what is commonly termed as, the Mark IV wording, but this wording has been amended often to what is termed a manuscript bespoke wording. Some industries have peculiar exposures, and the ISR wording for businesses in those industries should be amended to reflect this.

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