Several months before renewing its insurance coverage, a Marsh brokerage client and one of the nation’s leading financial institutions, released an RFP for more appropriate coverage. Eager to retain the brokerage business, Marsh met with the client to ascertain its goals regarding the renewal.

The client’s top three goals were increasing its business interruption (BI) coverage, increasing its extra expense (EE) coverage, and lowering its premium. At the time, the client carried $50 million in both BI and EE and determined that $250 million limits for each would be more appropriate.

The Challenge

Calculating the appropriate amount of BI and EE coverage is a complex process. Given that a financial institution continues to receive a large percentage of its annual revenue even if a facility is lost, adequately quantifying the lost earnings when a financial institution loses a building is as much art as science. This often makes underwriters uncomfortable as they may not have a high degree of certainty regarding the extent of the true exposure. Determining the percentage of revenue lost due to a property loss is the crucial point when obtaining appropriate BI and EE coverage. 

The Solution

Marsh enlisted its Financial Advisory Services (FAS) Practice to identify a new process to more accurately quantify the anticipated lost revenue while increasing the insurer’s comfort level relative to BI and EE exposures and coverage. Confident after the FAS successful engagements for financial institutions after 9/11, Marsh underscored its commitment to meet all three of the client’s renewal goals by putting our compensation “at risk.”

For this engagement, FAS and the client defined key businesses as those with revenue contributions of 15 percent and higher. With four weeks to complete the engagement, the team met with key business line CFOs to identify, locate, and analyze the necessary data.

The Result

The client was thrilled with the results and now felt confident that it was adequately covered should a loss occur. In addition to helping the client reach its goal, Marsh was able to show its industry leadership and expertise by incorporating a similar report on a marketing CD that was distributed to insurers in the United States, Bermuda, London, and Europe. The reaction to the report was overwhelmingly positive, and as one insurer stated, “it was the best thing since sliced bread”. Insurance markets are now requesting these types of reports when reviewing BI and EE placement opportunities for other financial institutions.

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