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TR Keller CPA, DipsFS Managing Director
122 Redferm Street Redferm NSW 2016 Australia
M [61] 401 219 417
E TRKeller@AllianceConsulting.net.au
W www.AllianceConsulting.net.au
122 Redferm Street Redferm NSW 2016 Australia
M [61] 401 219 417
E TRKeller@AllianceConsulting.net.au
W www.AllianceConsulting.net.au
CASE STUDY
Review of declared values for an abattoir - Australia:
A review of the policy, current declaration and financial detail noted that the insured was declaring significant fixed expenses as uninsured working expenses. This improper classification caused the insured to be 55% underinsured. As such in the case of a loss the insurer would only reimburse the insured 45% of any loss sustained, a position where the insured could never recover the business in the event of a loss. Adjustment of the declaration allowed for the proper calculation of declared values and reporting of these values to the insurer. Further to this declared value review the insured did in fact suffer a loss. Due to the proper classification of uninsured working expenses and the proper declaration of values the loss of $15m was fully covered and the insured was able to rebuild and reinstate operations.
Review and development of a declared value template for a global retailer – Hong Kong:
A global retailer with multiple operations and multi national locations grew exponentially over several years. This rapid growth and consolidation of multiple operations, locations and currencies manifested in a varied methodology for the calculation and reporting of declared values. In order to understand, properly calculate and report its declared values the insured required a thorough analysis of its declared values. Further, the insured wanted to ensure that each operation and location calculated and reported their values consistently. This would allow the insured and their broker to consolidate the declared values by operation and location at renewal and report these values with confidence to the insurer. As such a template needed to be developed which would allow each operation and location to easily and consistently calculate and report their values each year at renewal. To complete this project all operations were reviewed in detail and a declared value calculation developed using a common base of financial data. This calculation was then used as the format for the declared value template. For the implementation of the declared value template at renewal a specific process was developed and tested prior to the renewal. The process included a clear and concise instruction sheet noting the steps to be completed for the declared value calculation process. The instructions included running a program to extract the financial data from their accounting system and “dumped” into the template to calculate the values. Further instructions and examples for completing the template were provided to each location. A test of one global operation was completed and then rolled out to all operations. Based on the test the calculation, templates and instructions were finalised for use at renewal. At renewal all templates were completed and returned on time. The consolidation of the templates by the insured and their global broker was completed on time and included in their annual renewal package to the insurer. This declared value template process has been completed a second and third time for the insured’s annual insurance renewal without issue.
Review of declared values for an abattoir - Australia:
A review of the policy, current declaration and financial detail noted that the insured was declaring significant fixed expenses as uninsured working expenses. This improper classification caused the insured to be 55% underinsured. As such in the case of a loss the insurer would only reimburse the insured 45% of any loss sustained, a position where the insured could never recover the business in the event of a loss. Adjustment of the declaration allowed for the proper calculation of declared values and reporting of these values to the insurer. Further to this declared value review the insured did in fact suffer a loss. Due to the proper classification of uninsured working expenses and the proper declaration of values the loss of $15m was fully covered and the insured was able to rebuild and reinstate operations.
Review and development of a declared value template for a global retailer – Hong Kong:
A global retailer with multiple operations and multi national locations grew exponentially over several years. This rapid growth and consolidation of multiple operations, locations and currencies manifested in a varied methodology for the calculation and reporting of declared values. In order to understand, properly calculate and report its declared values the insured required a thorough analysis of its declared values. Further, the insured wanted to ensure that each operation and location calculated and reported their values consistently. This would allow the insured and their broker to consolidate the declared values by operation and location at renewal and report these values with confidence to the insurer. As such a template needed to be developed which would allow each operation and location to easily and consistently calculate and report their values each year at renewal. To complete this project all operations were reviewed in detail and a declared value calculation developed using a common base of financial data. This calculation was then used as the format for the declared value template. For the implementation of the declared value template at renewal a specific process was developed and tested prior to the renewal. The process included a clear and concise instruction sheet noting the steps to be completed for the declared value calculation process. The instructions included running a program to extract the financial data from their accounting system and “dumped” into the template to calculate the values. Further instructions and examples for completing the template were provided to each location. A test of one global operation was completed and then rolled out to all operations. Based on the test the calculation, templates and instructions were finalised for use at renewal. At renewal all templates were completed and returned on time. The consolidation of the templates by the insured and their global broker was completed on time and included in their annual renewal package to the insurer. This declared value template process has been completed a second and third time for the insured’s annual insurance renewal without issue.
CASE STUDY 
Having your declared values properly calculated and stated on the schedule of insurance is essential to the protection of the assets/revenue/profits which are being covered. Without the proper calculation and declaration of the values at risk, the insurance policy as risk management tool can be significantly impacted. In fact, it can be so significantly impacted that in the event of a loss from an insured peril the recovery of the business could be in question.
Alliance Consulting can work with insureds, brokers and insurers to provide the appropriate basis and detailed calculation for the declaration of values. Through detailed analysis and agreement on the calculation ambiguity is removed as to what is being covered and provides greater assurance to all parties that assets/revenue/profits are appropriately covered.
Cover for business interruption is based on the declarations of value by the insured. If the declared values are too high or too low the insured is, respectively, paying premium for coverage they do not require, or will most likely be in a position of co-insurance. Nether is a position an insured would want to find themselves in.
A formal review of the declared values would provide assurance that the insured values declared are proper. The review process would comprise detailed procedures including:
review of the current declared values calculation and current policy wording to understand the current methodology;
work with the broker and insured to understand the basis of cover and requirements for cover;
prepare a financial model to calculate the declared values;
present and discuss the results with the insured, broker and insurer.
Having your declared values properly calculated and stated on the schedule of insurance is essential to the protection of the assets/revenue/profits which are being covered. Without the proper calculation and declaration of the values at risk, the insurance policy as risk management tool can be significantly impacted. In fact, it can be so significantly impacted that in the event of a loss from an insured peril the recovery of the business could be in question.
Alliance Consulting can work with insureds, brokers and insurers to provide the appropriate basis and detailed calculation for the declaration of values. Through detailed analysis and agreement on the calculation ambiguity is removed as to what is being covered and provides greater assurance to all parties that assets/revenue/profits are appropriately covered.
Cover for business interruption is based on the declarations of value by the insured. If the declared values are too high or too low the insured is, respectively, paying premium for coverage they do not require, or will most likely be in a position of co-insurance. Nether is a position an insured would want to find themselves in.
A formal review of the declared values would provide assurance that the insured values declared are proper. The review process would comprise detailed procedures including:
review of the current declared values calculation and current policy wording to understand the current methodology;
work with the broker and insured to understand the basis of cover and requirements for cover;
prepare a financial model to calculate the declared values;
present and discuss the results with the insured, broker and insurer.