ENGINEERING INSURANCE 23
in managing this challenge through risk
Proliferation of technology Mitigating the risk
assessment, loss prevention and contingency
planning, backed by an equipment breakdown
The use of new sophisticated equipment As all of these trends emerge, they also
insurance programme.
for a range of business applications is also converge. For instance, ageing utility
on the rise. As a result equipment values equipment increases the risk of power
The fact is that electrical systems in many
are increasing in virtually all types and sizes blackouts and power fl uctuations; these
buildings simply were not designed to carry
of businesses and industry. With rapidly in turn, increase the risk of damage to the
the loads that are required by businesses
developing technologies, valuations and sensitive technology upon which business and
today. Business equipment including
exposures are diffi cult, which means they industry rely.
computers, printers, copiers and scanners all
are often poorly understood and severely
are voracious users of power and generators
underestimated. Individually, each trend presents a new
of heat. Older air conditioning and electrical
challenge. In combination, these risks can and
distribution systems can be overloaded
Even main street shops have gone high-tech, will increasingly threaten businesses as never
and fail with disruptive and expensive
with self-checkout and point-of-sale systems before. It is essential therefore for business
consequences for a business. In addition, no
and other electronics that track inventory, owners to assess their equipment exposures,
business is immune from the increasing costs
manage energy systems and operate fi re and improve maintenance and operations, develop
of power and the threat of power shortages
security alarms. Garages routinely use digital contingency plans and include appropriate
and disruptions.
diagnostic equipment and most production insurance protection, loss prevention and loss
machines have complex control systems control programmes. Obviously brokers are
The loss of power, or poor power quality,
leaving even small machine shops reliant on ideally placed to help clients understand and
can result in lost or corrupted data, which
automation. contain these risks as those who already help
in today’s information-based society can be
clients’ mitigate threats to their businesses.
a commercial disaster. In fact the capacity
It is apparent that even with a relatively
and reliability of power supply has already
standard risk such as a modern offi ce building, In a competitive business environment, with
Preparation
become a concern to the extent that some
the value of equipment often exceeds 20 per just-in-time delivery systems and maximised
larger businesses and institutions have
cent of the total building value. Sophisticated productivity, facility up-time is critical to
already installed and operate their own power
and critical building management systems are business. Unexpected outages can easily
generation equipment to offset costs and
present to optimise heating, air conditioning, cause customers to be lost. So it is crucial
ensure power availability.
lighting and security. that businesses and industry understand
and anticipate these issues now to protect
This widespread use of electrical and critical equipment and their operations from
Demand for equipment
is everything
electronic equipment, which is highly unexpected failures in future. Even with the
vulnerable to power surges and other best planning, failures will still occur. However,
At the same time demand for machinery and
disturbances, is increasing business risks for planning is an essential part of managing
equipment is increasing around the world.
commercial operations. Moreover, technology these risks and this combined with a tailored
Yet worldwide manufacturing capacity for
is advancing so rapidly that much of it equipment breakdown insurance programme
some critical infrastructure equipment, such
becomes obsolete quickly, making it diffi cult can help secure a businesses continued
as transformers, has remained relatively fl at.
to repair or fi nd replacement parts. In many viability.
With emerging markets consuming more of
cases, if key components are unavailable,
that available capacity, there is unprecedented
complete replacement is required.
competition for equipment.
We are also experiencing a data tsunami as
As more equipment is manufactured abroad,
data loss exposures are severe and growing.
delivery times for equipment, including spare
Surge sensitive technology – critical to every
and replacement parts, have lengthened
business – makes data even more vulnerable.
signifi cantly. Some large transformers, used
With new technologies and applications that
in utility and industrial applications, can take
store digital data, business data exposures are
over a year to replace. Smaller transformers
such that the cost of data recovery may easily
used in commercial businesses, such as
eclipse the expense of equipment repair and
shopping centres and offi ce buildings, often
replacement.
have delivery times of three to six months.
This fi erce competition for equipment creates
serious risks for businesses, including supply
chain disruptions, production delays, lost
customers and rising operating costs.
February 2010 Insurance Brokers’ Monthly
Regulation 22-23 + AD.indd 2 1/2/10 13:49:51
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