The size of an exclusion zone set up by emergency respondents after a major disruptive event has a significant impact on business interruption (BI) losses, according to the Australian Reinsurance Pool Corporation's (ARPC) latest report in conjunction with Finity Consulting and FPL Advisory.
The report, Exclusion Zones and ARPC's Interaction with First Responders, draws on ARPC's terrorism catastrophe models to analyse the economic impact of exclusion zones of various sizes set up after a major disruptive event, including a terrorism incident or other civil commotion. It found that application of exclusion zones can result in up to 10 times the insured losses expected from physical damage to an affected area due to BI's impact.
“Exclusion zones are a necessary tool to protect the public, stabilise property, and assist the post-investigation process, but it's important to understand that the size of, and duration of, an exclusion zone will impact businesses ability to operate,” said ARPC chief executive officer Dr Christopher Wallace.
“It is also worth noting that about 70% of small-to-medium enterprises (SMEs) are uninsured for interruption to their businesses from exclusion zones, so business owners could be left to bear these costs if a disruptive incident prevents access to their premises.”