Risks are not always black and white in the dynamic and unpredictable business environment of India. Although the common types of insurance such as fire, marine or liability insurance protect against the most likely losses, there are numerous business risks that are unique to a given situation and require bespoke solutions. Enter Special Contingency Insurance (SCI) -a flexible, powerful tool that is used when more conventional insurance has run out of options.
Special Contingency Insurance is a very important form of insurance that covers businesses against bespoke, non-standard risks, such as insuring a celebrity performance against last minute cancellation, covering a rare prototype during transit, or covering losses incurred in the event of a critical shutdown. And, with the changing face of Indian industries in all sectors be it the pharmaceutical sector or entertainment or IT or manufacturing, the applicability of SCI is increasing by leaps and bounds.
So what is SCI, how does it operate and why may it be just the thing your business requires? Let us explore all that in detail.
What is Special Contingency Insurance?
Special Contingency Insurance is a bespoke insurance policy which provides cover against certain pre-defined risks not normally covered by a standard insurance policy. It is usually bought when the risk is unique, of high value, time-specific or non-standard i.e. it cannot be categorized under the standard pre-defined templates of fire, marine, theft, or engineering covers.
- This is a tailor-made policy. You and the insurer both consent to:
- The type of contingency or peril to be insured
- The value of the asset or the exposure at risk
- The period of time over which coverage is required
In contrast to package insurance products, SCI is often a standalone contract that is specific to certain operational or financial risks in a business..
Key Features of Special Contingency Insurance
Here are the defining attributes that set SCI apart from conventional insurance policies:
- Custom-Built Cover
SCI is designed after understanding the business’s operational structure, vulnerabilities, and high-impact events. Each insurance policy is crafted to reflect the exact risk exposure.
- Named Peril Basis
The insurance coverage is strictly limited to risks specifically mentioned in the policy schedule—nothing more, nothing less. This makes risk assessment a critical part of the underwriting process.
- Agreed Value or Sum Insured
The sum insured is often based on an agreed value (especially for one-off items like artwork or prototypes), not just market value or replacement cost.
- Short-Term or Long-Term Duration
SCI can be event-based (e.g., 2-day concert) or year-long (e.g., for cold-chain logistics or continuous R&D). The duration can be adjusted as per business needs.
- Can Work as an Extension
It can function as a standalone policy or be attached as an endorsement or extension to a broader fire or liability policy.
Types of Risks Covered Under Special Contingency Insurance
Special Contingency Insurance in India is known for its versatility. This policy covers diverse risk categories such as:
- Machinery or Equipment Risks
- Coverage for expensive or leased equipment not covered under standard property or engineering insurance.
- Ideal for any contingency related to trade shows, exhibitions, or temporary site setups.
- Cold Chain Breakdown
- Protects temperature-sensitive stock such as vaccines, chemicals, or food items from spoilage due to refrigeration failure or power outage.
- Event Cancellation or Disruption
- Covers the expenses incurred and lost revenue due to force majeure events—like sudden political bans, natural disasters, or non-appearance of a key performer.
- Theft of High-Value Items
- Jewellery, antiques, or bespoke items (e.g., limited-edition fashion or tech prototypes) being transported or displayed can be protected under SCI.
- Construction Delays or Milestone Misses
- Special Contingency Insurance can cover penalty or liquidated damages if a key milestone in a construction or infrastructure project is delayed due to unforeseen, named causes.
- Loss Due to R&D Delays
- In high-stakes R&D, delays or damages to prototypes or testing setups can be financially catastrophic. Special Contingency Insurance can mitigate such losses.
- Loss Due to Riot, Civil Commotion or Terrorism
- For public-facing or government-sensitive projects, Special Contingency Insurance can offer targeted protection against social unrest, protests, or acts of terrorism.
Common Industry Applications in India
The flexibility of Special Contingency Insurance makes it applicable across several sectors, especially where risks are dynamic or project-specific.
- Media, Film & Events
- Movie shoots, concerts, sports events, and TV productions often carry non-recoverable expenses. SCI covers the expenses incurred due to disruptions, actor unavailability, weather issues, or venue problems.
- Pharmaceuticals & Biotech
- Ideal for companies storing vaccines, reagents, or biologics that are highly sensitive to temperature variations.
- Technology & Innovation
- Special Contingency Insurance helps tech companies protect prototypes, lab equipment, and test phases during high-value product development.
- Jewellery & Luxury Retail
- Temporary exhibitions or transfers of high-value items (gems, watches, paintings) are better secured under Special Contingency Insurance than transit insurance.
- Engineering & Infrastructure
- Contractors use Special Contingency Insurance to cover risks not insured under CAR (Contractor’s All Risk) or EAR (Erection All Risk) policies—especially for ancillary materials or temporary setups.
How Does Special Contingency Insurance Work?
SCI is a highly individualised process, involving close collaboration between the policyholder and the underwriter. Here’s how this insurance typically unfolds:
1. Risk Discovery
Businesses identify gaps in their existing coverage—specific assets, liabilities, or events that are vulnerable but uninsured.
2. Proposal and Customisation
A detailed proposal is submitted to the insurance provider outlining:
- Nature of risk
- Sum insured
- Duration of cover
- Potential loss scenarios
3. Premium Calculation
The insurance policy premium is determined based on:
- Risk severity and frequency
- Value of assets/events
- Policy duration
- Past loss experience or claim history
4. Policy Issuance
After underwriting approval, the insurance policy is issued with exact contingencies listed, including clauses and exclusions.
5. Claim Process
The claims must be supported by:
- Incident documentation
- Proof of loss (invoices, photos, video)
- Police report (if applicable)
The claim settlement is subject to validation and policy terms.
Benefits of Special Contingency Insurance
Let’s explore why Special Contingency Insurance is a smart risk management tool:
- Targeted Coverage
You get protection against risks that are uniquely relevant to your operations or assets, rather than relying on generic products.
- Enhances Risk Transfer
Special Contingency Insurance enables businesses to transfer niche risks to insurance providers. Thus, it helps reduce operational uncertainties and liabilities.
- Customisable and Transparent
You are in control—every term and condition is negotiable, and the cover reflects your actual need.
- Business Continuity
By covering unexpected disruptions, Special Contingency Insurance protects your revenue stream and reputation.
- Aids in Contract Compliance
In industries like construction or Government tenders, SCI can fulfil contract requirements for specific risk protections.
Limitations and Exclusions
While Special Contingency Insurance is comprehensive, it’s not all-encompassing:
- Named Peril Only: If the loss is caused by any contingency not named in the policy, it won’t be covered.
- Higher Premiums: Customisation means more underwriting effort and higher pricing, especially for high-risk events.
- Policy Duration Limits: Temporary or event-based covers may not extend beyond intended usage without renewal.
- Documentation-Heavy: Requires extensive proof during claims, and clear documentation before purchase.
Choosing the Right Special Contingency Insurance
To make the most of Special Contingency Insurance, follow these best practices:
- Risk Profiling
Conduct a thorough audit to identify uninsured exposures—especially in events, R&D, and logistics.
- Work with a Broker or Risk Advisor
Professional intermediaries help design a policy structure that aligns with your exact requirements.
- Compare Terms Across Insurers
Don’t just look at policy premiums—review sum insured methodology, claim settlement time, exclusions, and deductibles.
- Annual Review
Review and revise your Special Contingency Insurance coverage annually or with every major business change.
Regulation and Insurer Landscape in India
The Insurance Regulatory and Development Authority of India (IRDAI) regulates Special Contingency Insurance in India. Although not a ‘filed’ product with set wordings, the insurers must:
- Ensure policy transparency
- Abide by the specified claim settlement standards
- Avoid ambiguity in named perils
Final Thoughts:
The risks to businesses are increasingly becoming more subtle in the rapidly changing Indian economy. Whether it is in a biotech lab, on a Bollywood set, in tech R&D or at an art auction, two exposures are never the same and neither should be your insurance.
Special Contingency Insurance plugs these risk holes with a scalpel-like precision. Although it must be well-designed and may be more costly in terms of premium, its advantages in terms of financial security, business continuity and peace of mind far outweigh the costs.
When your business is based on non-substitutable assets, one-off events, or niche contracts- then SCI becomes not only highly recommended, but a requirement. Plan in advance, seek the advice of an expert and include Special Contingency Insurance as part of your overall risk management strategy.
