The Lloyd’s Market Association (LMA) is reviewing how Lloyd’s writes contingent business interruption after the heavy losses from last year’s catastrophes in Asia.

The association says the Japanese earthquake and tsunami and Thai floods have highlighted the importance of properly understanding the complex supply-chain elements inherent in clients’ businesses.

It notes that “just in time” production, which times delivery to avoid stockpiles of inputs, means “the knock-on effects of disruption to suppliers’ businesses can be greater and more complex than in previous decades”.

Global supply chains can also lead to a catastrophe in one region affecting businesses on the other side of the world and spark claims when a supplier or customer’s business suffers disruption.

This was the case with the Thai floods, which stopped production of items needed by other manufacturers around the world.

LMA Head of Underwriting Neil Smith says the review will look at quality of data held by the market on contingent business interruption risks and how underwriters monitor their aggregations and exposures.

The LMA’s worldwide property panel has drawn up a model questionnaire for suppliers and customers.

“What we’re trying to do is help contingent BI insurers understand their exposures better by producing a model questionnaire that clients can complete at the point of inception to ensure underwriters get the information they need,” Mr Smith said.