VATINS3830 | Types of insurance: disaster recovery business

These are schemes whereby a business makes an upfront payment to a provider who sets up and maintains a range of IT and related facilities in the event that a ‘disaster’ causes the failure of similar business systems on which the recipient relies. Although they may have some of the characteristics of insurance outlined in VATINS2110, generally they will not be seen as insurance because:

• use of the facilities on the occurrence of an event defined as a ‘disaster’ is not guaranteed. The facilities are available on a ‘first come first served’ basis; and

• the contracts are priced so that the total consideration paid bears a relationship to the cost of the services actually supplied.

Both of these factors indicate that the provider assumes no real risk.