Gas shortages across Europe may not be a significant source of business interruption (BI) claims, according to analysts at investment bank Jefferies.
They pointed out that gas rationing in Germany is now a plausible scenario for Q4 2022, and chemical production and glass manufacturing could potentially experience substantial business interruption because of gas shortages.
According to the report, despite the possible disruption to companies’ operations, BI covers would not be triggered as there will not be any physical damage.
Analysts explained that most insured BI cover comes in the form of an add-on to property policies, making business interruption related claims contingent on an underlying physical
damage claim.
However, the shutting off or reduction of gas supply is unlikely to damage property, analysts highlighted.
Jefferies said: “It is difficult to envisage how this will spark widespread physical damage required to warrant a property claim and therefore a contingent business interruption loss.
“It is feasible that in a handful of cases, machinery that is not designed to be turned off could be damaged by this loss of gas supply, but we expect these instances to be isolated and immaterial.”
