The Evolving Landscape

Business interruption (BI) coverage has become increasingly complex for Texas businesses in 2025, with significant gaps emerging between what companies expect their policies to cover and what protection they actually provide. As companies recover from multiple years of disruptions—ranging from pandemic-related shutdowns to severe weather events and supply chain collapses—these coverage shortfalls are creating serious financial vulnerabilities for businesses across the state.

Tightening Underwriting Standards

Insurance carriers throughout Texas have significantly tightened their underwriting standards for business interruption coverage in response to mounting losses. Insurers are asking more detailed questions before offering this type of coverage, particularly for companies that rely heavily on overseas vendors or have complex supply chains. The Impact of Tariffs on Your 2025 Business Insurance Strategy - Watkins Insurance Group This heightened scrutiny has resulted in higher premiums, more restrictive terms, and in some cases, outright coverage denials for businesses in high-risk industries or locations.

The increased stringency is particularly pronounced in areas prone to severe weather events, where many insurers have implemented stricter contingent business interruption limitations. In coastal regions like Houston and Galveston, where hurricane risks remain elevated, businesses face particular challenges securing adequate protection at reasonable costs.

Supply Chain Vulnerabilities Exposed

The global supply chain disruptions that began several years ago have exposed significant weaknesses in standard business interruption coverage. For Texas companies with multiple locations or complex supplier networks, overlooked details in their policies have become existential threats that could determine whether a business recovers or fails following a disruption. 4 Commercial Coverage Gaps Texas Executives Might Miss - Watkins Insurance Group

Many Texas businesses have discovered that their policies contain exclusions for foreign supplier disruptions or provide only minimal coverage for such events. This has become particularly problematic as international trade tensions and tariff issues continue to affect the flow of goods and materials. Companies in manufacturing, technology, and construction sectors are especially vulnerable to these coverage gaps.

Extended Restoration Periods

One of the most significant challenges facing Texas businesses involves the extended time now required to repair or rebuild after property damage occurs. Supply chain slowdowns are extending repair timelines, causing more businesses to file for business interruption coverage or experience longer disruption periods than anticipated. The Impact of Tariffs on Your 2025 Business Insurance Strategy - Watkins Insurance Group

Standard BI policies typically define specific indemnity periods—often 12 months—but the reality of current construction and equipment replacement timelines frequently exceeds these limits. Businesses are finding themselves with coverage that expires before operations can fully resume, creating substantial financial exposure for extended recovery periods.

Contingent Business Interruption Limitations

Contingent business interruption (CBI) coverage, which protects against losses resulting from damage to suppliers' or customers' properties, has become increasingly important yet problematic. The corporate world is now so connected and complex that underwriters need to understand accumulations of exposures within corporate distribution and value chains, as well as the impact of disruption and actions taken to mitigate them. Business Interruption Loss Trends | Insurance Thought Leadership

Texas businesses that depend on specific suppliers or customer facilities have discovered significant limitations in their CBI coverage. Many policies contain narrow definitions of covered suppliers or restrict coverage to direct suppliers only, leaving companies exposed when disruptions occur further up the supply chain.

Technology Outage Exclusions

As businesses become increasingly dependent on technology, gaps in coverage for technology-related business interruptions have become more apparent. Many policies are filled with exclusions, sublimits, and outdated definitions that leave companies exposed precisely when protection matters most. 4 Commercial Coverage Gaps Texas Executives Might Miss - Watkins Insurance Group

Cloud service provider outages, ransomware attacks, and general IT system failures are often insufficiently covered under standard business interruption policies. This creates particular challenges for Texas's growing technology sector and for traditional businesses that have become increasingly digitized.

Navigating the Challenges

To address these coverage gaps, forward-thinking Texas businesses are implementing several strategies:

1. Comprehensive Policy Reviews: More companies are conducting detailed reviews of their existing BI coverage with specialized insurance advisors who can identify potential gaps before claims occur.
2. Supply Chain Mapping: Businesses are creating detailed maps of their supply chains to better understand vulnerabilities and ensure appropriate coverage is in place.
3. Custom Policy Endorsements: Some companies are negotiating custom endorsements to address specific business interruption concerns unique to their operations.
4. Parametric Insurance Solutions: Innovative parametric insurance products that pay out based on triggering events rather than documented losses are gaining popularity among Texas businesses seeking more predictable protection.
5. Business Continuity Planning: Companies are investing in robust business continuity plans that can help mitigate losses and potentially reduce BI premiums.

For Texas businesses navigating these challenges, the path forward requires a strategic approach to risk management that goes beyond traditional insurance solutions. Understanding the specific vulnerabilities in business interruption coverage and addressing them proactively has become an essential component of financial resilience in today's uncertain business environment.