Recent weather extremes have started affecting Malta. Likewise, industrial accidents such as the recent fire in Birkirkara, where more than 220,000 litres of water and 5,000 litres of foam had to be deployed to contain the blaze was a reminder of how exposed businesses are to sudden accidents.
Undeniably, events like this will overwhelm any operation and, unless anticipated, can disrupt liquidity and ultimately threaten solvency.
Global data highlights the scale of the challenge.
According to research published earlier this year, 40% of businesses never reopen after a major disaster, and a further 25% fail within a year without effective continuity planning. For small firms in particular, the figures are more dramatic. 90% never resume operations after a disaster strikes.
Despite these facts, preparedness remains insufficient. More surveys also indicate that more than half of companies globally lack any form of business continuity plan, and only 30% of small businesses have a documented resilience strategy.
Within this context, insurance has an indispensable role not just in risk transfer, but in protecting cash flow and credit positions from the moment a shock occurs.
Too many firms rely on generic or legacy policies that inadequately reflect the value of their assets, the nature of their operations, or the scale of potential loss. A meticulously tailored insurance programme that aligns coverage to real exposures is a core element of financial resilience.
One critical but often underappreciated feature is the Payment on Account clause.
Following an insured incident, the detailed loss-assessment process that insurers undertake can take weeks or months when businesses rarely have the luxury of time or the cash reserves to delay repairs, equipment replacement, or regulatory compliance.
Payment on Account provisions allow insurers to advance interim funds once liability is accepted, based on validated and estimated losses. These amounts are later reconciled in the final settlement, but in the interim they can provide an essential bridge for working capital at a moment of acute strain. Such clauses are common in property, construction and marine policies, but under-emphasised in many risk programmes.
Comprehensive insurance is only part of the picture. A business’s greatest vulnerability often lies in the loss of income and ongoing operating costs when core functions are interrupted. Property insurance protects assets; Business Interruption insurance protects the continuity of cash flows, which becomes vital in terms of fixed obligations such as salaries, rent, loan servicing and supplier commitments. In its absence, these outflows will erode liquidity rapidly.
Robust BI coverage contains multiple components. Increased Cost of Working (ICOW) underwrites additional expenditures that are economically justified to accelerate recovery, ensuring that money spent yield equivalent or greater savings in lost turnover or profit.
Another layer, Additional Increase in Cost of Working (AICOW), extends this protection even where the cost-benefit calculation alone falls short — such as leasing temporary premises above market rates to retain clients, preserve contractual obligations, or safeguard long-term customer relationships. In many crises, these discretionary decisions determine whether a firm survives or falters.
The broader resilience strategy extends beyond insurance to disciplined Business Continuity Planning (BCP). Continuity planning is no longer an IT exercise; it is an enterprise-wide imperative.
Effective BCP identifies critical processes, diversifies supply chains, sets alternative work practices, codifies communications protocols, and embeds crisis governance.
Organisations with tested and maintained plans recover more rapidly, sustain fewer disruptions, and preserve stakeholder confidence. Indeed, research suggests that companies with regularly tested continuity plans are 2.5 times more likely to rebound quickly following a major incident.
For credit managers and corporate treasurers, the implications are clear. Cash flow is not just a metric but the is the lifeblood of creditworthiness and firms that after disruption, cannot resume operations within a short window, face sharply higher failure rates.
According to FEMA data cited by PMC and various industry sources, businesses that cannot resume operations within five days of a disaster face a 90% failure rate within one year.
The insurance market itself reflects this recognition.
Worldwide spending on business continuity and disaster recovery solutions reached nearly €650 million in 2024 and is projected to exceed €1.95 billion by 2033, growing at an annualised rate of 13% as firms grapple with cyber risk, climate volatility and supply chain fragility.
This is a world where operational risk continues to mount. Businesses that invest in tailored insurance programmes that enable continuity planning in the face of potential shocks will be protecting their liquidity and credit standing.
Ultimately, they will be the ones to show that preparedness is not discretionary but indispensable.
