In early July, a major U.S. property and casualty insurer (Chubb) released a proposal to establish a pandemic-related business interruption program that includes facilities for small, medium and large businesses. For small businesses, the program would provide for a fixed payment based on a multiple of government-reported pandemic and lockdown labor costs with a first layer of losses (beyond a deductible and up to $250 billion) co-insured by insurance companies and the state (with the industry`s share increasing over time) and a $500 billion surplus layer. which is funded by the government. Policyholders would only have to pay a premium to cover the industry`s share of the losses, which would reduce the cost of this insurance. Businesses should opt out of purchasing this coverage, confirming that they would not have access to federal business interruption coverage or pandemic assistance programs. For medium and large businesses, business interruption coverage could be purchased on a voluntary basis from private insurers who would transfer a portion of the risk (and premium) to a government reinsurer (Pandemic Re). Coverage would be capped at $50 million per policy, and industry retention would initially be capped at $15 billion and increase over time (Chubb, 2020[83]). Most catastrophe risk insurance programs use private market reinsurance (for programs that offer direct insurance coverage) or retrocession (for programs that offer reinsurance coverage). Additionally, one of the most significant (controversial) limitations of business interruption coverage due to COVID-19 (or other infectious diseases) in many jurisdictions is that coverage can only be triggered due to property damage and contamination may not be considered property damage.6 The challenge will be to increase coverage through a pandemic risk insurance program without replacing damage. existing materials. Change business practices related to business interruption coverage without prejudice.

Green Mountain State`s recent decision is the first state Supreme Court decision to allow an insured company to call in experts to testify that the virus violated its properties, as required by insurance coverage. The decision opens the door to scientific evidence on whether the coronavirus is damaging property — an important step for lawsuits over pandemic-related business losses that have been largely decided in favor of insurers. Note: 1 As already mentioned, there are public cantonal insurers in 19 Swiss cantons. The data in the table refer to the Cantonal Insurance and Prevention Institution of the Canton of Neuchâtel (by way of example). 2There are a number of other common and/or residual wind insurance agreements in other states, including Alabama, Georgia, Louisiana, Mississippi, North Carolina (North Carolina Coastal Property Insurance Pool, formerly known as the Beach Plan), South Carolina, and Texas (Texas Windstorm Insurance Association). Like Citizens in Florida, these programs aim to provide coverage to households that cannot obtain coverage in the private market. Proposals to oblige insurers to pay claims they do not wish to cover and for which they do not charge premiums or cancel provisions could have serious consequences. The magnitude of losses incurred by policyholders as a result of business interruption is a multiple of the amount insurers normally pay for business interruption and can far exceed the amount of excess capital (see below). If excess capital were depleted as a result of mandatory COVID-19 business interruption payments, insurers` ability to respond to claims arising from future events would be uncertain. The security of contractually agreed insurance coverage is also likely to be called into question if legislators could intervene to change the results – and this could have cross-border implications if some of the losses covered retroactively in one jurisdiction is reinsured in another.

7 South Carolina – S.B. 1188, 4-8-20, which requires insurers offering coverage for loss of use and/or business interruption to cover claims arising directly or indirectly from the COVID-19 pandemic. [60] EIOPA (2020), EU has key role in pandemic insurance: Interview with Gabriel Bernardino, Chairman of EIOPA, conducted by Hannah Brenton, Politico, European Insurance and Occupational Pensions Authority, www.eiopa.europa.eu/content/eu-has-key-role-pandemic-insurance_en (accessed July 10, 2020). [75] GDV (2020), Green Paper: Helping industry better cope with the consequences of future pandemic events, Gesamtverband der Deutschen Versicherungswirtschaf, www.en.gdv.de/resource/blob/59854/079826b589006ed3bd4fc7a09e64cf1a/pandemiefonds-vorschlag-download-green-paper-data.pdf. EY has a global network to guide you through the COVID-19 pandemic and beyond. We help protect your business from financial and reputational damage caused by claims and litigation so you can recover with confidence. „There`s still life in the best-argued Covid business interruption claims now that the lawsuit has moved decisively to state courts,“ said Tom Baker, a professor at the University of Pennsylvania`s Carey Law School. „The supreme courts of Iowa and Washington, and perhaps Oklahoma, would be open to better claims than they have decided.“ In Switzerland, the Ombudsman for Private Insurance commissioned a third-party report to clarify the applicability of various pandemic-related exclusions that are considered part of the terms and conditions of certain Swiss property and corporate insurance policies (Dörig and Bösch, 2020[35]). We have gathered all our expert reports, analysis and commentary on these cases nationally (and in some cases worldwide) and will continue to update this page with new developments. Articles are divided into three categories – Key Cases, Trends and Analysis and Expert Commentary – and listed in chronological order with the most recent content at the top of each section. [1] Statistics Canada (2020), April 2020 Business Revenues Compared to April 2019, by Business Characteristics (Table 33-10-0253-01), Statistics Canada, www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3310025301 (accessed November 6, 2020). A pandemic risk insurance program could also include requirements for covered entities to implement measures to limit the spread of the virus (e.g., increased ability to work remotely) and protect the health and safety of employees and customers.

For example, the U.S. Insurance Association`s Business Continuity Protection Program proposal includes a recommendation that compliance with federal health guidelines should be a condition for access to compensation (NAMIC, APCIA & Big I, 2020[70]). The insurance industry could also advocate for strengthening government preparedness through a pandemic risk insurance program.1 The COVID-19 experience will certainly lead to increased interest in such coverage, although it is unclear whether this will result in a long-term change in voluntary use. especially if the cost of coverage is significant. Experience with other disaster risk insurance schemes suggests that the mere provision of coverage may not be sufficient to achieve extended coverage. While airlines regularly monitor capital and liquidity, their main focus now is to determine if their balance sheets are strong. Some companies might try to acquire new companies to strengthen the balance sheet, and many might find that valuations could become quite reasonable in the near future. Others may want to identify non-core assets that could be disposed of, and some may need to divest themselves of buildings to finance the acquisitions they are seeking. [31] FCA (2020), FCA seek legal clarity on business loss insurance and consumer and small business support package, Financial Conduct Authority, www.fca.org.uk/news/press-releases/fca-seeks-legal-clarity-business-interruption-insurance (accessed May 4, 2020). By pooling much of a country`s exposure to a particular hazard (or set of hazards), a catastrophe risk insurance program might be able to achieve a lower total cost of coverage than individual insurers could achieve on their own. GAREAT`s reinsurance coverage is provided by private reinsurers and CCR (Government Entity). It appears that many COVID-19 business interruption claims by policyholders are being denied by insurance companies.

In the United Kingdom, for example, a survey of hotel businesses found that less than 1% of hotel businesses, 3% of restaurateurs and 4% of beer and restaurant establishments received a positive response from their insurer regarding business interruption coverage for COVID-19 closures (Gould, 2020[14]). In the United States (as of November 2020), less than 2% of completed claims filed with insurers were paid for business interruption4 (NAIC, 2020[15]). Some insurance companies have responded by offering additional coverage or making voluntary payments to support businesses affected by the disruptions caused by COVID-19 (see Text box 3).