As companies across the UK are rapidly adapting to an ever-changing operating environment, we will use this page to give regular updates on what we see as the important issues for those with responsibility for risk and insurance management.
Wednesday 2 April:
1.00pm – Following the PRA’s recent action over bank dividends and bonuses, insurers are now finding themselves in the spotlight. Today’s article in the Times gives more context:
“Britain’s biggest insurers are set to make multimillion-pound In the letter, Mr Woods said that the PRA expected boards “to pay close attention to the need to protect policyholders and maintain safety and soundness” when they were “considering any distributions to shareholders or making decisions on variable remuneration”.
Monday 30 March:
4.00pm – Mactavish’s CEO Bruce Hepburn writes for Insurance Age on why the industry should take the current disruption as an opportunity to reform itself:
“When we explain to a worried policyholder that the extension they bought specifically for circumstances such as these explicitly excludes ‘new diseases’, we lose the trust of that client for life. After all, aren’t we supposed to be the experts on the one-in-one-hundred-year event?”
Friday 27 March:
8.00am – In this latest update we share some our thoughts on the complex question of when you should notify your insurer of potential pandemic related claims:
“The decision as to what you should notify and when isn’t an easy one when the situation around you is changing day-by-day. On one hand, an early notification may prompt your insurer to offer guidance on how to manage the situation in line with your policy’s requirements – and to take a more favourable view of any resulting claims, on the other, a notification made now could lead to later losses arising from the event being excluded from future cover at renewal.”
Thursday 26 March:
9.00am – As we move to the next phase of responses to the pandemic, our team will continue to publish advice and tips on how to handle the challenges that we see in our day to day work. In this post we focus on the impact of claims made against companies by their employees and shareholders.
Tuesday 24 March:
8.00am – Mactavish contributes to Anthony Hilton article on the failure of both corporates and the insurance industry to understand and manage pandemic related risks:
“We have the biggest single random event which is clearly insurable, but boards have focused on cost-cutting and removing “redundancy”, while the insurance industry is sitting on the sidelines, thinking it is not its problem.”
Sunday 22 March:
8.00am – The Sunday Telegraph quotes Mactavish’s CEO Bruce Hepburn in an insightful article on the impact of Coronavirus on insurer’s reserves:
“The coronavirus crisis will be the final straw that plunges commercial policyholders into crisis with soaring insurance prices, massive reductions in cover and a hard line on large claims as insurers seek to rebuild their balance sheets, just as they did after 9/11,”
Friday 20 March:
12.00pm – We see another exclusion explicitly ruling out Covid 19 related losses.
A major insurer/reinsurer has removed an original communicable disease extension wholesale from a policy and added a new exclusion specifically ruling out Covid 19. The policyholder was not informed that the extension was being removed despite an imminent renewal.
All policyholders should take care to track changes between current and proposed wordings as they approach renewal – Mactavish expects to see much more of this.
Thursday 19 March:
10.00am – Update on likely extent of coronavirus related coverage.
Our technical team are reviewing policies from a range of insurers and brokers. As we do so we’ll continue to share advice on what to look for in your own policies. As ever, if you’re in doubt, the team will be happy to discuss this with you.
“Businesses face unprecedented interruptions of sites closing, suppliers & customers closing, supply chain disruption, staff unavailability. Most businesses buy business Interruption (BI cover, but almost none will be insured – why is this?
Commercial insurance is more complicated than most realise, and BI is no exception. BI cover is divided into various sections and is subject to many T&Cs, exclusions and extensions. Core ‘BI’ is triggered by physical site damage (such as after fire/storm). Other BI covers are specialist extensions:
a. Most relevant to Covid19 is ‘Contagious Disease’ BI cover – which covers interruptions arising from an outbreak of disease. But there are lots of possible problems:
i. Most businesses don’t buy this extension, and may not have even been aware of it as an option
ii. Where a standardised product is bought, disease sublimits are very low & will be a tiny fraction of the likely impact of Covid19 on the business
iii. Cover is subject to complex terms and conditions, especially problematic for a ‘new’ emerging disease:
- Cover may be restricted to certain named diseases
- It may be limited to “notifiable” outbreaks (i.e. those public health bodies already monitor)
- It may require there to be known cases within the immediate vicinity of a company’s site
- It often requires an official order to close down
- It might be challenged by insurers on the basis of being a ‘wide area’ event affecting a whole region rather than a localised issue that they intended to cover
iv. The Chancellor has now clarified that current government advice is sufficient to be deemed an order to close – but this addresses only one of the limitations above
v. The net position is still that most businesses will not have the cover, and even for those who do it may not provide anywhere near enough protection and may not trigger. The Association of British Insurers has now confirmed this.
b. There are other policy sections which might seem to respond (e.g. ‘Denial of Access’) – although this is typically restricted to where there is nearby damage (e.g. a neighbouring building or localised infrastructure damage) and a specific police order to close. This is unlikely to apply to current policyholder situations.
c. For event cancellation insurance, the picture is similar – in that policies vary in what events causing cancellation are included. So again the government clarification that their ‘advice’ is sufficient to trigger, whilst welcome, only helps in the minority of cases.”
9.30am – Expanding on our call for government support for insurers and policyholders, we explain how we think the pandemic will impact the insurance industry in both the long and short term. Key topics include:
- How much of the impact can be mitigated by insurance
- What are the likely outcomes for the insurance industry?
- Will Coronavirus drive a long term change in the way risk is understood and managed?
Wednesday 18 March:
12.00pm – Mactavish issues guidance on five practical steps policyholders can take to protect their businesses. Our experts share their advice on key questions:
- Covid 19 – what are you covered for?
- How do I stay compliant with my insurance when my business is changing overnight?
- Are there new risks I should be transferring?
- How will this impact on my renewal?
- How will this impact on my claims?
Tuesday 17 March:
2.00pm – Ahead of the Chancellor’s announcement of emergency financial measures, Mactavish call for government support for policyholders and insurers.
- Most Coronavirus linked losses will be uninsured, but investment profits for insurers have fallen dramatically – exacerbating hard market conditions
- Insurance premiums set to rise exponentially, some insurers will withdraw cover, and more exclusions will be included in policies
- Mactavish calls for creative approach including suspension of insurance premium tax, government lending to insurers, temporary freeze on insurance rates, automatic renewals
- This could lead to a major long-term shift in which risk is transferred back to companies, further limiting their activities as they attempt to manage their response to the ongoing economic disruption