Power outage / cold chain: coverage, evidence, and business continuity

Introduction

For an SME that stores or processes temperature-sensitive products, a power outage that disrupts the cold chain is not just an operational problem, it's a significant financial risk . Without adequate coverage, a prolonged power cut can lead to lost stock , additional costs for alternative solutions, and a business interruption that is difficult to absorb.

What this guide will allow you to do:

• understand what insurance coverage exists (and its limitations) for such a claim;

• know what to document and how to structure your claim file ;

• Define a method to manage and monitor your risks related to the cold chain .

1. Risk of "power failure + cold chain": what is it?

1.1. Operational definition

A power outage is an interruption of the electricity supply, whether due to an internal failure or a fault in the public grid. When it occurs in an activity dependent on controlled temperature, it jeopardizes the quality of stored products and can lead to a partial or total shutdown of operations . This risk is particularly acute in the food, pharmaceutical, and logistics sectors.

1.2. Direct and indirect risks

The consequences include:

• loss of stock , particularly perishable products;

• damage to equipment (refrigerators, freezers, generators);

• contractual penalties if delivery commitments are not met;

• Interruption of operations , with an impact on revenue.

2. Relevant insurance coverage

2.1. Business property / multi-risk insurance

Business property insurance typically covers direct physical damage to equipment. However, coverage for products lost due to a power outage directly related to a grid failure is not always included and depends on the terms of your policy.

According to practical guides, specific additional coverages for "damage due to power failure" exist in certain special contracts for temperature-sensitive goods and foodstuffs, subject to specific conditions and exclusions.

Action from the manager/CFO : explicitly check in your contract whether the power outage causing loss of cooling is covered, and under what conditions (duration, cause, exclusions).

2.2. Business Interruption Insurance

Business interruption insurance is designed to compensate for financial losses resulting from the shutdown or reduction of business activity following an insured event. It can cover:

• lost revenue ;

• fixed costs not covered by the activity ;

• additional costs to maintain operations (overtime, rental of temporary facilities, etc.).

In the event of a power outage that disrupts the cold chain, this coverage can be essential to ensure financial continuity while the system is being restored.

2.3. Specialized "cold chain" blankets

There are specialized insurance products on the market (often outside Switzerland or via international insurers) that cover the cold chain and losses of perishable products related to power outages, equipment failures or temperature disturbances .

These fonts may include:

• protection against the loss of stored products ;

• Coverage for the replacement of refrigeration equipment ;

• sometimes specific business interruption compensation related to the cold chain.

These products are often suited to specialized logistics operations (cold storage facilities, perishable goods distributors). In the Swiss context, a customized analysis with a broker is recommended to assess the suitability of this coverage.

2.4. Common limitations of standard fonts

Be aware of common exclusions:

• Breakdowns due to administrative decisions are sometimes not covered;

• Some policies require the presence of an electrical backup system to validate coverage;

• Indirect losses related to external problems (suppliers, public networks) may require specific extensions (contingent business interruption).

3. Risk management: a simple method

3.1. Identify and map your critical dependencies

Start by documenting:

• key energy dependency points;

• maximum tolerable duration of a power outage before significant product loss;

• existing backup systems (generators, UPS).

3.2. Disaster scenarios and decision thresholds

Define scenarios :

• Scenario A: power outage < 2h with generator → minimal impact ;

• Scenario B: 2–6h power outage without backup → risk of stock loss ;

• Scenario C: prolonged outage > 6h → interruption of activity .

For each one, establish:

• performance indicators;

• alert thresholds;

• Internal responsibilities.

3.3. Integrate proactive measures

Set up :

• backup generators sized for the critical load;

• regular testing of these systems ;

• Temperature monitoring systems with external alerts.

Incorporating these elements into the dialogue with the insurer can improve the quality of coverage and sometimes reduce premiums.

4. Guidelines and checklist

Reference points for documentation to collect

What needs to be documented before and after a disaster:

• copies of your insurance policies and relevant clauses;

• maintenance reports for refrigeration equipment and backup systems;

• temperature logs before, during and after the failure;

• technical reports from the electricity supplier or network operator;

• internal reports of operational consequences ;

• photos and evidence of stock losses.

Decision-making checklist

| Step | Required document | Internal contact |

| Claim declaration | Insurer form signed | Management / CFO |

| Technical evidence | Logs, reports, photos | Technical lead |

| Loss estimation | Before/after inventories | Finance / operations |

| Continuation scenario | Alternative production option | Direction |

5. Common mistakes and how to avoid them

5.1. Thinking that a standard multi-risk policy is sufficient

Mistake : relying solely on standard property insurance.

Antidote : review the clauses on power outage and product loss, identify the exclusions.

5.2. Poor documentation of evidence

Error : missing time-stamped logs and technical reports.

Antidote : put in place traceability systems and archive them regularly.

5.3. Lack of an energy contingency plan

Mistake : waiting for a breakdown to occur before reacting.

Antidote : Test and maintain your generators and UPS systems according to a strict schedule.

6. 10 Questions to Ask Your Insurer/Broker

1. Does my current policy cover product loss due to a prolonged power outage?

2. What are the compensation timeframes for this type of claim?

3. What evidence do I need to provide for a complete statement?

4. Do specific exclusions apply to public network outages?

5. Is there a specialized cover for the cold chain?

6. Which extensions (contingent business interruption) are relevant to my business?

7. Do my backup systems affect the premium or coverage?

8. How does the insurer assess indirect losses (interrupted business)?

9. What claims handling processes does the insurer offer (speed, contact)?

10. Can I integrate these risks into a risk management dashboard ?

Mini case studies

Case 1 — Food SME with temperature-controlled storage

A small business stores fresh produce for distribution. A five-hour power outage occurs in the middle of the night, with no generator available. Internal documentation shows that the temperature exceeded critical thresholds, resulting in stock losses. Based on logs and technical reports from the grid operator, a claim is filed with the insurer for product loss and business interruption. With appropriate coverage, the company receives compensation for the lost stock and a portion of its fixed costs during the shutdown.

Case 2 — Pharmaceutical workshop with dual backup system

A pharmaceutical workshop dependent on low temperatures invested in a properly sized generator and a UPS system. During a local 3-hour power outage, the backup systems maintained the cold chain, as evidenced by the detailed logs. Proactive documentation and robust measures prevented losses and enabled the company to negotiate a more favorable premium.

Conclusion

For a Swiss SME exposed to power outages that threaten the cold chain , a structured insurance strategy is based on:

• a clear analysis of available coverage and its limitations;

• rigorous documentation of facts and evidence;

• a method for managing scenarios and responses .

The goal is to transform a latent risk into a controlled, documented, and revisable element over time. In case of doubt or complexity, a specialist broker can help you adapt your hedging portfolio to your specific operational needs and integrate these risks into your daily governance.