We work closely with adjusters, engineers, lawyers and other experts to provide a reliable service in Business Interruption claims worldwide. We have always taken an independent and technical approach to our analysis. We believe the role of a forensic accountant can be summed up in a single word – measurement. Our task is to analyse where an Insured would have been but for the loss and where they are now, to respond to adjusters’ instruction regarding the policy, and to measure the financial impact of any scenario we are instructed.
There is no single solution to any business interruption claim. By building trust, information is shared readily and joint models can be put together rather than working in isolation. It is one thing to believe you have the correct solution and another to be able to demonstrate and convince another party that you are correct. We are extremely proud of our reports and schedules and feel our record stands for itself – every single claim we have been involved in from the outset has settled amicably without the need for litigation. Our diverse portfolio of files and clients gives our work a degree of authority and means settlements are accepted by Insureds and the follow market.
We also provide forensic accounting services for Warranty & Indemnity insurance (also known as “W&I”, “Representations & Warranties” or “R&W”) claims. For further details please click here.
© 2017 — C. LEWIS & COMPANY
Retail and entertainment losses can be more complex than they first appear. Generally there is a great deal of sales seasonality, from times of year to days of a week and even hours of a day. Sales can be highly dependent on external factors such as major events, new releases of products, the weather, proximity of sister sites and / or competitors. Rebuilding on the same site can often be problematic, resulting in delays in returning to ‘normal’ business and resulting in a ‘new normal’. Consequently, budgeting accurately can be difficult, which means that we often rely on other methods of measurement, such as correlation analysis, designed to factor in actual market conditions during the indemnity period.
We have successfully worked in teams that have settled major and complex retail losses throughout the UK, Europe, USA, South America, and Asia.
Incident – Total loss of a large hypermarket.
Key Issues – There was partial make up at a nearby smaller sister store. A new replacement store was built near to the loss site within the maximum indemnity period. The new store was: 1) at an inferior location due to local infrastructure; 2) smaller than the lost store; 3) nearer to a sister store, which adversely affected its sales.
Outcome – The Insured did not know how to correctly calculate their Business Interruption losses and agreed to allow us to construct the loss model. This was then shared with the Insured to establish a collaborative BI loss model. The loss settled for less than €4.5m, which included calculated sales make up totalling of c. €12m and fixed cost savings of c. €1.5m.
Incident – A fire at a large cinema complex during a peak season when a record number of box office hits were released.
Key Issues – Cinema attendance is highly correlated to the number of big budget film releases in a period.
Outcome – We were able to accurately model expected attendance at the loss site by reference to attendances at all other of the Insured’s cinemas, while capping attendance at the loss site’s proven historical capacity. The loss was amicably settled for c. £600k.
Pharmaceutical losses have the potential to be very large. They are complex, due to: complicated supply chains from production to end consumer; intercompany pricing that is designed to move profits from one tax jurisdiction to another; licencing problems meaning production make up at other undamaged facilities, even within the same plant, is impractical / impossible; licensing problems resulting in a delay restarting production.
Pharmaceutical companies can have a very broad product range and, depending on whether products are generic or branded, the price and profit differences between products can be enormous, as research and development costs are recouped.
We have successfully worked in teams that have settled major and complex pharmaceutical losses in the UK, Europe, USA and Middle East.
Incident – Fire at one of multiple facilities, which resulted in the entire plant being shut down along with all other plants globally using similar processes.
Key Issues – We were instructed to calculate the losses attributable to only the Damage at the one affected facility. Despite being a major loss, the loss of revenue in relation to the Insured’s overall revenue was very small. Significant detailed data analysis was therefore required to isolate losses sustained by the Damage to the one facility from the losses sustained due to the shutdown of the loss site and other production facilities.
Outcome – An amicable settlement totalling c. $17m.
The sales in these industries are generated by intangibles. Whether it be billable hours of a professional service company, sales commissions of recruiters, mobile / cell phone traffic, or trading profits, there are common potential complications and considerations. These include: the fact that budgeting may be highly inaccurate or impossible; the potential for ‘lost’ revenue to be either partially or wholly delayed revenue; and potential off-site make up.
We have successfully worked in teams that have settled major and complex losses in the UK, Europe, and USA.
Incident – The Insured specialised as a wholesale broker of over-the-counter derivatives, money markets and securities. Following Hurricane Sandy, access to offices in and around New York was affected resulting in impacted normal business operations for a period of 5 business days.
Key Issues – Due to the nature of the products on offer and the variability of the markets, determining the ‘no loss’ expected sales proved difficult. Market trend analysis of the each of the generalised product areas had to be undertaken.
Outcome – The loss was amicably settled for US$3m
This is a very broad industry category. Each industry and business type has its own idiosyncrasies and set of considerations. Seasonality, external factors such as the weather, and macro-economic conditions can all have a material effect on sales at any given time. It is important to approach each loss with an open mind and willingness to learn. Where possible, specific and detailed market data should be sourced and analysed in order to support calculations.
We have successfully worked in teams that have settled major and complex losses in the UK, Europe, USA, South America, Asia, and Africa.
Incident – A major automotive industry loss due to a fire in the midst of the aftermath of the financial crisis of 2008, which resulted in an initial Business Interruption claim estimate of c. $30.5m.
Key Issues – The sales losses were in the Original Engineering (OE) and downstream After Market (AM) markets, which required separate loss calculations and considerations. Separating the losses attributable to Damage and to the global downturn in the automotive industry was essential and, although difficult, achieved with agreement of both the follow market and the Insured.
Outcome – We performed a detailed analysis of large complex data sets, which facilitated an agreed settlement of c. €12.5m.
Incident – Primary distribution warehouse for a nationwide distributor destroyed by fire, resulting in a c. £6m final claim for Business Interruption.
Key Issues – The Insured hit overall forecast sales revenue despite the disruption, which affected them through their peak season, making valuation of the disruption difficult.
Outcome – By working closely with the Insured, and by obtaining all necessary detailed data and key market data, we were able to verify the claimed losses and satisfy insurers sufficiently to facilitate payment.
Natural disasters and catastrophic events present numerous difficult challenges to insurers. The immediate necessity is to identify their customers and potential exposures in the affected areas along with providing rapid assistance and aid where possible, to assist recovery/rebuilding.
To aid in this process, C. Lewis has not only provides assistance with the computation and calculation of industrial losses, but has also assisted insurers to identify, catalogue and calculate their own exposures and notify re-insurance markets. Should any event occur in the future a dedicated team of our experts is always ready to respond as required.
Over the years, C. Lewis has provided assistance and expertise to Insurers following catastrophic events in countries all over the world, including: Hurricanes Wilma, Rita, Katrina (2005), and Ike (2007); earthquakes in Chile (2010) and Japan (2011); and flooding in the UK (2007), Thailand (2011) and mainland Europe (2014 & 2015).
The complexity of the oil refining and petrochemical industry creates a minefield for insurers in the event of covered losses. The upstream and downstream interconnected relationships of the companies operating in this sector can result in losses at a numerous production facilities arising from a single incident. The size and scale of the industry means that minor incidents can result in large losses to the insurance market.
Due to the complexity of the manufacturing process and the overall potential number of products and markets the companies are operating in, LP models are consistently the fundamental tool Insureds use to plan and subsequently compute insurance losses. Understanding and interpreting these models can prove difficult.
We have a team of experts with considerable experience working on these losses, using LP models and identifying all the nuances that can occur case to case. C. Lewis has provided expert analysis and assisted in settling multimillion dollar losses around the world.
Global market demand fluctuations, complex production facilities, interdependency of sister plants and inefficiency losses alone make steel/aluminium/nickel manufacturing loss particular difficult to compute, however experience dictates these are normally combined with a multitude of other claims issues to make these losses even more interesting.
C. Lewis is a leading global expert in the analysis of Steel Mills and other metal production facilities with over 25 years global experience handling the some of the largest claims.
Over the years, the complexity of these types of losses has increased as mergers and acquisitions in the respective markets have led to the creation of many more fully integrated mills. It is this experience that enables our experts to understand, interpret, process and present loss calculations that facilitate settlement of these types of losses and preventing over indemnification.
Power industry losses can be very complicated due to the differing and complex systems of financing and distribution throughout the world. Power Purchase Agreements (PPAs) can be very complex. Insurance Policy issues are common, as there are often concurrent causes of financial losses at play, and those losses may come to fruition some considerable time after the generation loss occurred.
C. Lewis have successfully contributed to the settlement of countless power industry claims throughout the world, including hydro, renewables, diesel, gas, steam losses, and delay in start-up (DSU).
Mining losses are complex due to the unpredictable and uncertain nature of the business. Significant judgement and estimates are required by management in the preparation of financial information. As a result, mining companies maintain extensive and sophisticated forecasts and budgets. Variables that need to be carefully considered in the forecasting process include: commodities still to be extracted, processing facilities’ capabilities, ongoing exploration activities, changing input costs and commodity prices, and weather and commodity seasonality. Forming an operational understanding of each mine is an essential part of the valuation process, which often requires a multidisciplinary loss adjustment team.
We have successfully worked in teams that have settled major and complex mining losses throughout Africa and South America.
The Food & Beverage industry operates within an international, often global, supply chain. Considerations include: 1. Raw material contamination – increased costs may have to be incurred in order to source alternative materials and, if unable, may result in gross profit losses which may in turn have coverage issues. 2. Valuation issues where long storage times are required e.g. winery losses. This results in revenue losses manifesting and continuing many years after the date of loss, making pricing unknown and difficult / impossible to predict, and considerations for what discount factor to be applied. 3. Returnable packaging may be used, which means that an Insured’s assets are not in one location, but spread over a large area and many different locations. 4. Seasonality and heavy dependence on unpredictable and uncontrollable variables such as the weather. 5. Market forces on certain product lines may be unpredictable due to fashions / trends – what was popular last year may not be so this year.
Despite all of the above, we have successfully worked in teams that have settled Food & Beverage losses in Europe, Africa and South America.
Incident – A brewery’s key 3rd Party distribution warehouses flooded, resulting in a Business Interruption claim in excess of €10m.
Key Issues – Numerous concurrent causes for sales loss, including Damage to Insured’s property, bad weather, less tourists, local economy suffering, poor access, damage at customer premises. We were advised by adjusters and insurers that only Damage to the Insured’s property and at customer premises had Policy coverage.
Outcome – We requested and obtained sufficient data and documentation from the Insured to allow us to calculate and amicably agree the proportion of losses covered under the Policy, resulting in an overall settlement of less than €5.5m.
Hotels and Hospitality losses from an outsider perspective can often be mistaken as being simple to quantify, this is often far from the truth. The hotel industry can vary dramatically from a single building with no ancillary facilities to multi hotel resorts and condominium complexes with restaurants, casinos, nightclubs and bars; and the nature / cause of the loss can drastically impact the overall size and difficulty of loss computations. The hospitality industry throws up similar challenges. Long term projections when policies are purchased are always based on best case scenarios when in practice the likelihood of these outcomes is marginal. These aspects alone can make accurate budgeting tricky and this is before consideration is even given to other factors like seasonality, weather, loss of attraction, wider area damage to name a few.
Even with these challenges, C. Lewis have successfully worked in teams that have settled major and complex hotel and hospitality losses throughout Europe, Asia, Africa, Oceania and the Americas.
Utilities, transmission networks and infrastructure provide key services to corporations, governments and individuals. This can simply be through providing electricity, gas and water to enable manufacturing and telecommunication services or by enabling companies to get raw materials in for production and finished products out for sale. Unlike other business sectors, when issues arise with these companies the impact is felt by all. There is therefore an urgent need to provide assistance and restore services quickly.
The issues with these types of claims generally arise due to the nature of the business, an incident at one pumping station or damage to a couple of mobile phone towers or electricity pylons can have far reaching consequences that result in large business interruption claims. Whilst customers may still be able to be supplied a service, compensation/remuneration payments normally are necessary and operational costs tend to rise dramatically. Furthermore many utilities companies’ revenue streams are set out through complicated agreements with Local Authorities.
Over the years, C. Lewis have successfully worked in teams that have settled major and complex utilities and key infrastructure losses in the UK and Europe, Asia and South America.