Industrial Special Risks 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, Shopping Centres to business operations with locations scattered throughout Australia.
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
Section 2: Consequential Loss
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.
An ISR policy has various sections which are summarised below:
Section 1: Material Damage
Section 2: Business Interruption
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.
The standard exclusion in an ISR policy can be categorised as either Property or Peril exclusions.
Examples of standard Property Exclusions are:
Example of standard Peril Exclusions include:
These exclusions can be amended or written back, meaning the exclusion is deleted from the policy - subject to the Insurer's agreement of course.
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.
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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