XYZ Ltd identified a pandemic as one of the factors that can cause severe disruption in their

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Question:

XYZ Ltd identified a pandemic as one of the factors that can cause severe disruption in their daily operations.

Although XYZ has business interruption cover, the concern was that claim payments from the policy may be delayed or insufficient, which may further impede operations, especially if funds earmarked for investment must be redirected to working capital.

XYZ has obtained a post-loss contingent facility from ABC Insurance Ltd that can be used if losses are above an agreed threshold.

Explain the characteristics of such a post-loss contingent facility.