When the Facility Stops: Business Interruption and Contingent BI
Faraday's read: property damage is the visible loss; business interruption is the one that decides the quarter. The load-bearing variable is the indemnity period — how long the insurer agrees to keep paying while you rebuild. Data centers break the ordinary assumption that repair time and downtime move together, because the constraint is rarely the building. It is a transformer or a switchgear lineup with a lead time measured in months. Underwrite the supply chain, not the structure.
Knowledge check
Why can the business-interruption loss from a data-center incident vastly exceed the property-damage loss, and what single assumption most often makes a BI policy inadequate?
Show the answer
Because downtime cost accrues continuously and is driven by how long critical long-lead equipment takes to replace — often transformers or switchgear with multi-month lead times — not by how long the building takes to repair; the most common inadequacy is an indemnity period set to reconstruction time rather than to realistic equipment-replacement time, which leaves the operator uncovered for the tail of the outage.