Business Interruption Losses – The Overlooked Risk

In the field of non-life insurance, most businesses tend to focus on protecting tangible assets such as factories, machinery, equipment, or goods. However, one equally critical but often overlooked risk is Business Interruption (BI) losses.

In reality, incidents such as fire, machinery breakdown, or natural disasters not only cause direct damage to property but also disrupt business operations for a long period. During this downtime, companies still have to bear significant fixed costs: employee salaries, warehouse rentals, bank loan interest… while revenue flows are almost cut off. As a result, the financial impact is often many times greater than the initial property damage.

BI Insurance – A “Double Shield” for Businesses

Business Interruption insurance is the solution to maintain financial stability in the event of a loss. Beyond covering the cost of repairing or replacing damaged assets, BI insurance also provides compensation for:

-Lost profits caused by production downtime;

- Fixed operating expenses that must continue during the recovery period;

- In some cases, additional expenses incurred to accelerate business recovery.

This coverage enables businesses to preserve cash flow, retain their workforce, and maintain relationships with customers and suppliers – all essential for post-loss recovery.

A Real Case in Vietnam

A garment factory in Southern Vietnam once suffered a fire in its fabric storage. The damaged property was valued at around VND 30 billion, fully covered under property insurance. However, the greater loss was the production halt that lasted more than four months. During this period, the company lost approximately VND 50 billion in export revenue and incurred nearly VND 10 billion in fixed costs such as salaries and storage rentals. The total financial loss reached VND 60 billion, double the value of the property damage itself. If the company had purchased BI insurance, these financial gaps could have been compensated, helping the business maintain competitiveness and secure international contracts.

Conclusion

In Vietnam, Business Interruption insurance is still underutilized, mostly due to a lack of understanding about its mechanism and long-term benefits. Yet, in today’s global supply chain environment, where risks such as natural disasters, fire, and technical failures are always present, BI insurance is increasingly vital. It provides a “double shield”, protecting not only assets but also the financial stability and business reputation of enterprises.