Industrial Special Risks Insurance Australia

What is ISR – Industrial Special Risk Insurance?*

Industrial Special Risk Insurance (ISR Insurance) is a commercial insurance dedicated to covering physical assets and complex business operations-related risks. ISR is an ideal option for large businesses with physical assets (buildings, contents, stock) and gross profits, totalling more than $10,000,000.

In some cases, there are small ISR options available for businesses with assets and gross profit totalling $5,000,000.

ISR insurance policies are typically divided into two sections: Property Damage and Consequential Loss/Business Interruption.

Unlike standard business policies, ISR Insurance may offer a higher degree of flexibility and customisation, allowing some policies to be tailored to meet the unique needs of the client.

ISR insurance is critical for commercial property holders and businesses with substantial physical assets, including properties, commercial premises, and equipment, providing comprehensive protection against a range of perils such as fire, natural disasters, theft, and accidental damage.

Polices may be structured to cover material damage, and business interruption, ensuring that businesses can sustain operations financially in the aftermath of unforeseen events.

With its ability to accommodate a vast array of industries—from industrial and offices to retail and healthcare—ISR Insurance stands out as an essential solution for businesses seeking robust protection for their high-value assets and continuity in their operations.

What Does ISR Stand For?

ISR is the abbreviation of Industrial Special Risks—an insurance option to cover large or complex risks, those that cannot be covered under commercial policies for small and medium businesses.

Why do businesses need Industrial Special Risk Insurance?*

For businesses with significant assets exceeding $10 million, Industrial Special Risk (ISR) Insurance emerges as a critical safeguard. This necessity stems from the multifaceted risks that today’s businesses face, that can threaten their operational continuity and financial stability.

ISR Insurance may be tailored to offer expansive coverage for physical assets, including buildings, stock, plant, and machinery, ensuring that businesses are protected against a wide array of potential damages.

By covering any cause of damage not explicitly excluded, ISR may provide a robust safety net that enables businesses to focus on growth and development rather than the potential setbacks caused by unforeseen events.

Particularly for organisations that span multiple locations or engage in diverse business activities, the broad indemnity offered by an ISR policy may provide protection, regardless of where their operations are based or how varied their assets may be.

What Are The Different Types Of Risks Covered By ISR Insurance?

Following are the risks (but not limited to) that may be mitigated by ISR insurance:

• Damage and/or loss to buildings, plant, machinery, contents, stock and other property, this could be due to fire, perils, natural disasters explosion or other events.
• Business interruption impacts – loss of profits, revenue or rental income resulting from property damage and interrupted activities.
• Accidental damage
• Glass Breakage
• Theft and vandalism

How Does ISR Insurance Work?

Customisation of policies as per the specific needs of the business is a feature this insurance option. They serve as a broad safety net with comprehensive coverage including covers, except those specifically excluded by the policy.

What Is the Process For Obtaining ISR Insurance?

A business can obtain ISR insurance by following the below steps:

1. The first step can be risk assessment by the business owner, sometimes in conjunction with an insurance broker. insurer. It not only gives an idea of the scope of business operations, but also all the risks associated.
2. The next step is submitting the proposal by the business with all the required information about its operations and assets. This may include images of the property, surveys and asset registers.
3. Comprehensive discussion based on the risk assessment between the insured, insurance broker, and insurance company for policy customisation.

Industrial Special Risks policies can be complex so may require a full needs analysis to understand the risks faced and develop an appropriate risk protection program for your business.

It takes a significant amount of experience to advise on a suitable industrial risks policy, brief in your business risks in detail ,and negotiate competitive terms with insurance companies and underwriters.

Depending on your industry the “risk appetite” of insurance companies and underwriters vary considerably. A high calibre broker with extensive experience working on ISR policies can make a significant difference in the outcome for you at both policy inception and if you ever need to claim. As claims can be significant with industrial special risks policies it is vital to have your business risks suitably specified and covered.

What does Industrial Special Risk Insurance cover? *

Industrial Special Risk (ISR) Insurance is a comprehensive policy designed to protect businesses against a wide range of risks and damages to their valuable assets. It is structured to cover virtually any cause of property damage not specifically excluded, ensuring a broad safety net for businesses with high-value assets.

An ISR policy is divided into two main sections: Material Loss or Damage, and Consequential Loss.

Property Damage in an ISR policy may cover:*

• Reinstatement or replacement of the assets – building, stock, contents, machinery, theft, money , glass
• Architects, engineers, surveyors and other fees payable to facilitate reinstatement;
• Fees necessary for local authorities for rebuilding approvals and costs necessary to comply with statutory authorities – eg. heritage;
• Customs fees, excise and other duties necessary;
• Temporary protection of property awaiting its repair or replacement;
• Replacement of locks, alarms, keys and combinations when damaged or stolen;
• Removal of debris, reinforce damaged property, interim repairs;
• Repair or replacement of directors and staff valuables left on the premises;
• Costs in quashing a fire and/or restocking fire protection equipment;

Consequential Loss in an ISR policy may cover:*

• A decline in turnover or revenue
• Increased costs to limit any decline in turnover or revenue ( increased cost of working). This may include any valid expense incurred to get the business operational again such as the use of back up facilities or sites, overtime payments to employees, importing equivalent products etc.
• Payments to professionals and other expenses to prepare a claim;
• Payroll costs

What Are The Benefits Of ISR Insurance?

1. Comprehensive Coverage: It may offer a broad range of coverage that can be customised to protect many of a business’s assets and operations.
2. Risk Management: As part of the process of obtaining a suitable ISR policy an Insurance broker may be able to provide risk management guidance to assist businesses in identifying possible risks and effectively mitigating them.
3. Cost Savings: Businesses may reduce the overall cost of insurance policies by combining various coverages into a single ISR policy.

What Are The Drawbacks Of ISR Insurance?

1. High Premiums: The higher the limits and the more extensive coverage are, the greater premiums will be.
2. Limited Coverage For Certain Risks: Risks like nuclear hazards or war are typically not included in ISR insurance policy. Other risks that may be implied in  business pack are not included in an ISR unless explicitly specified, for example, machinery breakdown.

How Does ISR Insurance Differ From Other Types Of Insurance?

1. Property Damage Insurance vs. ISR Insurance: Property damage insurance only protects building, contents and stock for physical damages at the insured premise. Whereas, ISR insurance is more comprehensive, covering property damage, business interruption, theft, vandalism and glass all in one policy. It also includes sub-limits providing additional coverage.
2. Public & Products Liability Insurance vs. ISR Insurance: Liability insurance may safeguard a business from claims resulting from injury to third-parties or third-party property damage. However, ISR policies insurance do not include Public & Products Liability Coverage. A seperate Public & Products Liability Policy is required.

To conclude, ISR insurance is one of the most comprehensive and sophisticated approaches to managing business risks. It can work wonders for large businesses with complex needs, thanks to the ability to customise and ISR and the extensive coverage.

However, on the other hand, it is highly recommended to carefully consider the policy wording to ensure all risks that you want to cover are included.