As the coronavirus pandemic continues to grow in scale and intensity, business interruption insurance is one of the many key P&C lines that will come under pressure amid a broader scrutiny of operational activity, a panel of industry executives told The Insurer during the first in our series of virtual Covid-19 roundtables.

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While an array of coverages will be tested in the fallout from the coronavirus, one of the most obvious is business interruption – with the first lawsuits already having been filed, as companies grapple with what is and isn’t covered under traditional policies, which mostly rely on a property damage trigger.

“Companies will emerge from this crisis with a clear desire for much better defined and more broadly available business interruption coverage,” Hudson Structured Capital Management’s CEO Mike Millette said.

“In a modern world of operations that are less physical facility intensive and more reliant on smooth functioning of society [BI coverage framework] could be flipped on its head,” he added. “There will likely be some claims paid but there is also likely to be some testing of policy language in the courts, and the outcome is unclear.”

Millette’s comments were echoed by Allied World global markets president, Edward Moresco, who described BI as an “obvious” source of claims. Hyperion X’s managing director of analytics, David Flandro, said BI will “clearly be under the microscope, especially where public liability and/or civil authority covers are included.”  

Flandro also highlighted: “Environmental liability lines, permanent health insurance (termination of employment), med mal, worker’s comp, including communicable disease exceptions, event cancellation, travel, aviation – especially airline, D&O, professional indemnity, energy lines, not to mention credit & surety – this is all before one reviews traditional life, accident & health policies which are often the focus of pandemic risk.”

However, there are many unknowns to such an unprecedented scenario shaking the world and claims will not be the only focus for insurers going forward. 

The widespread effect on balance sheets – which has seen worldwide stock indices tumble to their lowest level for decades in the last couple of weeks – represents something of a “perfect storm” for companies that were already suffering from prolonged low interest rates and searching for more profitable (riskier) equities and assets, according to Flandro.

“In my view, this will be more acute for carriers than the actual claims emanating from this situation,” he said.

Unexpected challenges

CRC Group’s commercial solutions division president, Mike Brennan, spoke of the need for the industry to keep tabs on potential exposures and aggregation issues.

“To be sure, we all want our individual organizations to shine during a time like this, but, at the same time, we need to educate each other about how best to respond to customer needs,” he said.

His comments come at a time when the industry is under great scrutiny from authorities, businesses and the public alike – which all have differing opinions of where the responsibility should lie for getting the world back on its feet.

The UK’s Financial Conduct Authority has said general insurers should make allowances for insureds to claim to reflect the situations they now find themselves in, while the UK government last week revealed a £330bn relief package for businesses – particularly in the hospitality sector – hit hard by coronavirus closures. In the United States, New Jersey lawmakers have called for insurers to cover BI-related losses regardless of some policy exclusions, which has been combated by industry groups arguing that BI cover was never designed to cover losses caused by the disease.

“The industry as a whole needs to show its commitment to insureds,” Brennan said. “There is no better time than now for the wholesale sector to demonstrate its relevance and value in the insurance chain.”

Click here to read The Insurer’s first Covid-19 roundtable, which we have made available to all subscribers and the wider (re)insurance community free of charge.