Monday, March 16, 2020

From the P&C Files: CV-19 Exclusions

The other day, we learned that Business Interruption coverage is unlikely to extend to business that (temporarily) close their doors while the pandemic plays out. Turns out, there's likely a few more lines of coverage that will likely exclude CV-1-related claims.

Our good friend (and P&C guru) Bill M tips us to this item:

"U.S. P&C insurers face 'limited exposures' from coronavirus"

"While the virus will undoubtedly impact the health and life insurance markets, the U.S. property & casualty (P&C) sector may emerge relatively unscathed once the pandemic subsides."

Okay, I'll bite: why is that?

Well, it comes back to something we've seen before:

"Bill taught me a new phrase, and suggested I use it whenever I'm looking at these kinds of (potential) claims: "cause of loss." That is, which circumstances are specifically covered, and which are specifically excluded."

And here's where that phrase comes into play, CV-19-wise:

"However, if a factory closes because of fears that an infected worker contaminated equipment, BI coverage could be triggered. “But even in this case,” Fitch says, “claim exposures would likely be limited by policy sub-limits.”

This is different from the situation we discussed this past Friday: in this case, there seems to be an actual physical cause; but again, even that claim will probably be limited in scope.

This would also apply, for example, to supply chain disruptions and even travel interruption plans.

We  discussed this a couple of weeks ago:

"Plans where the Cancel for Any Reason upgrade has been purchased allows travelers to decide for themselves whether to travel or cancel their trip according to the terms of the plan."

One can imagine there's been a substantial uptick in interest in those kinds of plans, but as the article notes, "the adverse impact insurers will likely face will be from a decrease in demand" as folks decide to maybe trade in a staycation for that cruise (at least for the nonce). And it doesn't have to be international travel, either:

A colleague told me the other day about a friend of his who had tickets for the A-10 (?) basketball tourney in New York. He cabbed from the airport to his hotel, checked in, and learned that the event ha been canceled. Okay, disappointing, but we'll just take in a show, right?


"Broadway Shuts Down: Performances Canceled Through April 12 Due to COVID-19 Pandemic"


Now, one area where carriers may see specific exposure is event cancellation (see above). When basketball and now even golf tournaments are canceled (or postponed), there may well be valid claims, depending on what type of coverage the organizers bought (if any). For example, "if the Olympics were to be canceled, Moody’s asserts that “losses could become material for some insurers,” with industry experts estimating insurance coverage for the games to be around $2 billion."

That's a lot of gold.
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