I dunno. I think that insurance will usually only cover Replacement Value, so if it cost them $20 per item and they sold it for $25, they could only claim $20. Then compounded with failure to meet contracts and updated cost of production (may cost $21 to make now) I doubt that they made money.
You’re right that the cost of insurance is where the real hurt will be - see ship insurance in the Strait
We’ll there are lots of kinds of insurance, a manufacturing and distribution company isn’t going to have the same insurance you buy as a homeowner. I would expect they are covered for whatever they calculated into their cost/risk contract?
That said, i maybe know enough to know most of what i don’t know, but far from inside into on the topic.
Certainly could be, and doubtful that they are fully insured against all contingencies… Possible they are underinsured against for intentionally, since they could conceivable think it’s low enough risk that it’s cheaper to allow a loss even as big as this to fall under operating losses for rare or occasional incidents like this.
Once a company is big enough even subjectively huge losses are simply a calculated risk. Do you pay a million dollars a year for 10 years to subsidize something that might cost 10 million dollars that only happens every 20 years, or do you bank on it not happening and write it off as a bad quarter if it happens?
Way more goes into those calculations than one might think, and if they’re self insured there’s just a budget item that takes a hit for this and someone gets chewed out it fired for being the one that gambled this way… While someone else loses a promotion if they signed off the other direction and paid for a million dollar policy they didn’t need.
Insurance is all mostly the same regardless of type. You aren’t going to find a company willing to take the counter party risk of you losing a claimed retail value of a product, especially a commodity. If it was collectables or bespoke crafts then it would likely be different.
Sounds like you’re more familiar with the industry than i am, but my understanding is that insurance policies are written based on what you want to cover and the value is reflected in the premiums. Companies often have an assumed product, returns and stale inventory loss calculated in. Possibly just recuping costs for ‘all’ inventory could be a plus for the bottom line, especially if there were anything like a rider for opportunity costs. The building itself could have been out of step on depreciation and now moved up with a more modern facility in planning.
May not be the same situation but plenty of business owners have considered it a windfall having insurance pay out on replacement costs for things they you weren’t utilizing and an opportunity to put up a bigger shop and roll the payouts into more modern supplies and equipment rather than gathering dust on sunk cost stuff they never would have gotten their money out of otherwise.
If you consider insurance payouts a windfall there’s probably fraud involved. Insurance generally doesn’t pay more than a thing is worth because of fraud. It’s a little more loose with things that can’t easily be valued, like art or a life.
I dunno. I think that insurance will usually only cover Replacement Value, so if it cost them $20 per item and they sold it for $25, they could only claim $20. Then compounded with failure to meet contracts and updated cost of production (may cost $21 to make now) I doubt that they made money. You’re right that the cost of insurance is where the real hurt will be - see ship insurance in the Strait
We’ll there are lots of kinds of insurance, a manufacturing and distribution company isn’t going to have the same insurance you buy as a homeowner. I would expect they are covered for whatever they calculated into their cost/risk contract?
That said, i maybe know enough to know most of what i don’t know, but far from inside into on the topic.
They are probably “self insured”
Certainly could be, and doubtful that they are fully insured against all contingencies… Possible they are underinsured against for intentionally, since they could conceivable think it’s low enough risk that it’s cheaper to allow a loss even as big as this to fall under operating losses for rare or occasional incidents like this.
Once a company is big enough even subjectively huge losses are simply a calculated risk. Do you pay a million dollars a year for 10 years to subsidize something that might cost 10 million dollars that only happens every 20 years, or do you bank on it not happening and write it off as a bad quarter if it happens?
Way more goes into those calculations than one might think, and if they’re self insured there’s just a budget item that takes a hit for this and someone gets chewed out it fired for being the one that gambled this way… While someone else loses a promotion if they signed off the other direction and paid for a million dollar policy they didn’t need.
Insurance is all mostly the same regardless of type. You aren’t going to find a company willing to take the counter party risk of you losing a claimed retail value of a product, especially a commodity. If it was collectables or bespoke crafts then it would likely be different.
Sounds like you’re more familiar with the industry than i am, but my understanding is that insurance policies are written based on what you want to cover and the value is reflected in the premiums. Companies often have an assumed product, returns and stale inventory loss calculated in. Possibly just recuping costs for ‘all’ inventory could be a plus for the bottom line, especially if there were anything like a rider for opportunity costs. The building itself could have been out of step on depreciation and now moved up with a more modern facility in planning.
May not be the same situation but plenty of business owners have considered it a windfall having insurance pay out on replacement costs for things they you weren’t utilizing and an opportunity to put up a bigger shop and roll the payouts into more modern supplies and equipment rather than gathering dust on sunk cost stuff they never would have gotten their money out of otherwise.
If you consider insurance payouts a windfall there’s probably fraud involved. Insurance generally doesn’t pay more than a thing is worth because of fraud. It’s a little more loose with things that can’t easily be valued, like art or a life.