Industrial All Risk Insurance (IAR)

Industrial All Risk Insurance (IAR) in Thailand

What is IAR Insurance?

Property All Risks Insurance (also known as Industrial All Risks or IAR) is a type of insurance that provides coverage against loss or damage to all types of business-related property including buildings, machinery, inventory, and office equipment caused by unexpected events, unless those events are explicitly listed as exclusions in the insurance policy.

This type of insurance differs from Named Perils Insurance in that it does not limit coverage to only the perils specified in the policy. Instead, it offers "all risks" coverage, meaning it protects against any potential damage or loss, without the need for the insured to anticipate what specific risks may arise.

Simply put, if an event causes damage to the insured property and that event is not listed as an exclusion, the damage is automatically covered.

This type of insurance is especially suitable for businesses exposed to a variety of risks, such as factories, warehouses, offices, or enterprises with high-value inventory and machinery, as it offers the most comprehensive and flexible protection.

Main Coverage

1. Fire, Lightning, and Explosion

Covers damage caused by fire, lightning strikes, and explosions from pressure vessels or boilers.

2. Flood and Water Leakage

Covers property damage due to flooding from external sources or leakage from burst water pipes within the premises.

3. Storms, Earthquakes, and Other Natural Disasters

Includes damage caused by heavy rain, hailstorms, landslides, or ground subsidence.

4. Vehicle Impact or Falling Objects

For example, damage caused by vehicles crashing into buildings, cranes toppling, or aircraft falling onto the premises.

5. ️‍️ Burglary (with forcible entry evidence)

Covers loss or damage to property caused by break-ins involving force or violence.

6. Electrical Short Circuit or Power Surge

Covers damage resulting from electrical failures, such as short circuits, power surges, or voltage fluctuations.

7. Damage to Machinery and Office Equipment

Includes damage due to unexpected incidents or malfunction of control systems.

8. Damage Caused During Firefighting or Emergency Rescue

For example, breaking doors to conduct rescue operations or water damage caused by firefighting efforts.

**This type of policy provides coverage for all losses except those specifically excluded in the policy wording.

General Exclusions

1. ️ War, Terrorism, or Civil Commotion

Loss or damage caused by acts of war, civil war, revolution, riots, or terrorism is excluded.

2. Wear and Tear / Deterioration

Excludes damage resulting from normal usage, gradual wear and tear, or material degradation over time.

3. ️ Nuclear Risks

No coverage for any damage caused by nuclear materials, radioactive contamination, or nuclear processes.

4. Intentional Acts by the Insured

If the loss or damage is proven to be deliberately caused by the insured or the beneficiary, coverage will be voided.

5. Computer Virus or Electronic Data Loss

Excludes losses related to computer systems, software corruption, data loss, hacking, or cyber attacks.

6. Unexplained or Mysterious Disappearance

For example, missing items with no visible sign of forced entry or no clearly identifiable cause.

7. Chemical Contamination or Non-Accidental Pollution

Excludes damage caused by gradual leakage, chemical contamination, or pollution not resulting from a sudden accidental event.

Insurable Property Types

1. Buildings and Permanent Structures

e.g., office buildings, factories, warehouses, commercial buildings, shopping malls.

2. Machinery and Production Equipment

Includes industrial machines, heavy machinery, and specialized production equipment.

3. Stock Inventory

Raw materials, finished goods, and merchandise stored in warehouses.

4. Office Equipment and Furniture

e.g., desks, chairs, filing cabinets, copiers, office telephones, etc.

5. Computers and IT Systems

Including servers, POS (Point of Sale) systems, CCTV surveillance systems.

6. Movable Property Within the Insured Premises

e.g., factory trolleys, portable tools, or equipment not operated on public roads.

7. Interior Decorations and Fixtures

e.g., lighting systems, partition walls, built-in air conditioning, built-in furniture and decor.

8. Automation Systems and Electrical Equipment

e.g., temperature control systems, security systems, emergency power supplies, UPS.

Required Documents for Insurance Application

1. Proposal Form

Includes details of the insured property, type of business, location, and desired coverage.

2. Asset List with Sum Insured

A categorized list of assets such as buildings, machinery, stock, and furniture, including replacement values.

3. Site Plan / Location Map

Used for risk assessment, showing building layout, safety systems, and potential hazard zones.

4. Photos of Premises and Property

Exterior and interior photos of the insured location, including high-value machinery or assets.

5. Legal Registration Documents

e.g., Company Affidavit, VAT Certificate (Por.Por.20), or Commercial Registration (for sole proprietors).

6. Safety System Information

Details on installed fire sprinklers, extinguishers, alarm systems, CCTV, etc.

7. Insurance and Claim History (if available)

Helps insurers assess risk and determine more accurate premium rates.

8. ️ Copy of ID / Power of Attorney

Required if someone is signing or submitting the documents on behalf of the insured.

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Note: Some insurers may request additional documents such as a Risk Survey Report in cases involving high sums insured or special-risk properties.

Suitable for What Types of Businesses?

1. Industrial Factories

Businesses with large-scale machinery, production lines, and inventory, such as food processing, plastics, or electronics factories.

2. Warehouses and Distribution Centers

Operations with significant stock levels, vulnerable to fire, flooding, or theft.

3. Office Buildings and Commercial Premises

To protect buildings, furniture, office equipment, and IT systems.

4. Retail Stores, Showrooms, and shopping malls

Especially those with high-value displayed products and interior fittings.

5. Real Estate Projects and Construction Sites

Coverage for buildings under construction or ongoing commercial development projects.

6. Hospitals, Clinics, and Health Service Centers

To protect medical buildings, equipment, and critical electrical systems.

7. Hotels, Resorts, and Holiday Properties

Covers buildings, furniture, appliances, and customer service infrastructure.

8. Educational Institutions, Private Schools, and Universities

To protect classroom buildings, laboratories, and computer rooms.

How Insurance Premium is Calculated

Premiums for All Risks Insurance policies are not fixed and are determined based on the specific characteristics of each business. Key factors include:

1. Total Sum Insured

o Includes the replacement value of buildings, machinery, inventory, furniture, and systems.

o Should be based on reinstatement value (new replacement cost), not market value.

2. Type of Property and Business Activity

o For example, a plastic manufacturing plant has a higher risk than an office building.

o Businesses using chemicals or high-voltage electricity may fall under special risk categories.

3. Existing Risk Prevention Measures

o Such as fire extinguishers, sprinklers, fire alarm systems, and CCTV.

o Locations with effective risk management systems typically receive lower premium rates.

4. Location of the Property

o Properties in flood-prone or densely populated areas may incur higher rates.

o Properties in industrial estates with good safety standards may receive preferred rates.

5. Claims History

o Frequent or high-value claims may result in a higher premium.

o A clean claims record may qualify for a No Claim Discount.

6. Risk Survey Report (for high-value coverage)

o The insurer may assign an engineer or representative to conduct an on-site inspection.

o The findings from this survey influence both the premium rate and coverage terms.