The Vitzliputzlis of business interruption insurance
Business interruption insurance often covers risks which are only supposedly harmless. If related supplementary covers are included in many policies at the same time, they may generate a significant cumulative effect.
Referring to this supposedly harmless independent or collateral covers against loss of income as Vitzliputzlis, this new Swiss Re publication focuses on the additional business interruption "extras" that underwriters need to take into consideration when assessing and writing risks. In addition to reviewing these underestimated risks, the publication offers recommendations on how to handle them effectively.
Through their vast number of facultative and contractual acceptances, international direct insurers and reinsurers are particularly exposed to a number of severely underestimated Vitzliputzlis. including:
- Business interruption following damage at customers and suppliers
- Covers following power outages or other utility failure
- Impaired attractiveness of the location
- Restricted or blocked access with or without public authorities’ orders
- Shut-down or restriction of operations due to losses other than property damage
These and similar add-ons come in many shapes and sizes (and sometimes even in disguise), often taking the form of relatively limited first-loss covers or leading a meagre existence as either “special conditions” or supplementary clauses in insurance policies. Additionally, under certain circumstances, Vitzliputzlis can cause cumulative events that stretch the bounds of quantifiability. This particularly impacts reinsurers that may blindly take on these covers in proportional and non-proportional treaty reinsurance. Some of the most dangerous types of Vitzliputzlis – such as covers for IT failures due to the spread of general computer viruses via providers – cannot be diversified in terms of either space or time.
Used as a collective term and generic expression for the purpose of this publication, the name Vitzliputzli brings to mind a quirky character from the Punch and Judy show or children trick-or-treating in Halloween costumes. The name Vitzliputzli was first used by 19th Century German writer Heinrich Heine in his famous poem “Romanzero” and now evokes the shape of quirky ghosts in plays or mischievous hobgoblins at Halloween that take revenge on anyone who misjudges them.
