Insurance Advisory for A Spinning & Yarn Manufacturer

How our no-nonsense approach helped a client to claim their insurance efficiently, effectively, & (almost) effortlessly.

The client suffered a loss due to an outbreak of fire in a Fully Pressed Cotton Bales Go-down.

✅ Accounting details.
✅ Closing Stock of FP Cotton Bales in their accounting software.
✅ Go-down Register containing details of the Incoming & the Outflow of FP Cotton Bales.

• The Go-down Register maintained by the insured was destroyed in the fire.
• No records were kept of the waste generated during the spinning process.
• The client was unable to substantiate the quantity of FP Cotton Bales claimed in the formal claim bill they submitted.
• The lack of proper record-keeping made proving the loss difficult.

• We leveraged the “Reverse Material Balance Method” by converting all the various closing stocks of Finished Goods, Work In Process into FP Cotton Bales.
• During this process, we also considered the opening stock of FP Cotton Bales, the work In process, as well as finished goods.

• It was concluded that there was no malafide intention of the insured in regard to the causes of loss, and the loss sustained was real.
• The insurers were convinced by our methodology & appreciated the efforts for finding an amicable and acceptable solution.

1. What insurance covers are essential for a spinning & yarn manufacturer?

Industrial All Risk (IAR), Machinery Breakdown, Business Interruption (BI/LOP), Burglary, and Marine Transit are key. Add-ons like Spontaneous Combustion and RSMD protect against cotton-related fire risks.

2. Why is Business Interruption insurance critical in textile manufacturing?

It compensates for lost gross profit and fixed expenses when production halts due to insured events like fire or machinery breakdown, ensuring business continuity.

3. How can underinsurance be avoided in textile industry policies?

Set the Sum Insured at full replacement cost for buildings and machinery, including freight and duties, and use the 12-month peak value for stocks to match fluctuating inventory.

4. What add-on clauses provide extra protection for textile units?

Recommended add-ons include Escalation (10–15%), Debris Removal, Architects/Surveyors fees, Earthquake (Fire & Shock), and Deterioration due to humidity or temperature changes.

5. How does an insurance advisor improve claim settlement?

Advisors ensure accurate asset valuation, correct policy structuring, and complete claim documentation, helping secure faster, fairer settlements.