World Health Organisation (WHO) have officially declared COVID-19 as a pandemic. BSA have already received several instructions regarding coverage advice related to matters arising from the coronavirus. While all efforts are being made by the WHO and Governments around the world to contain the coronavirus and look to develop a vaccine, world business and trade has been impacted with issues around supply chains and business interruption.
We anticipate that (re)insurers will have some part to play in terms of a shift of risk and loss from its insureds to them, as capacity-providers under certain insurance coverages. This will give the immediate need for policy coverage reviews including insuring clauses, type of insurance coverage and exclusions.
Insured businesses will need to carry out risk assessments of their current supply chains and look for alternative measures, review contractual provisions to explore whether any of those provisions provide protection such as a “force majeure” clause. In addition, all insurance coverage should be reviewed and analysed to explore whether and to what extent the policy would respond to the coronavirus outbreak.
From our experience, we have seen certain coverage terms that address several areas of coverage, which are broad in scope, where insureds’ have relied on these as comfort for an event such as the coronavirus outbreak. These could be, for example, “Properties All Risk” or “Financial Lines” insurance. However, these coverages may not be appropriate and may not respond to an event like the coronavirus outbreak as opposed to a more tailored insurance coverage, such as a business interruption insurance coverage. Generally, any business interruption coverage, in order to respond to any form of virus outbreak will need to include a “notifiable diseases” extension in the policy terms or additional endorsement. This is then normally triggered by Government/Ministerial Orders. Note, that many business interruption insurance policies do not include these provisions and specialist insurance advice should always be sought.
Companies with financial lines insurance coverage will need to look closely at their insurance terms while also taking measures to mitigate any exposure in taking or failing to take certain actions where those financial lines insurance policies would not respond, but for their failures in taking or not taking certain measures.
Medical and travel insurers will have been impacted by the coronavirus outbreak and those insurance providers will need to review current capacity with its reinsurance arrangements, where many of those policies will need to respond to claims unless otherwise excluded with the primary insurance coverage.
Finally, it is certain that the coronavirus will, without a doubt, trigger litigation, insurance claims and coverage disputes in 2020 and beyond and this will have implications for the global insurance market and capacity.
Authored by Partner and Head of Insurance/Reinsurance Simon Isgar