News Coronavirus watch27 Mar 2020

UAE:COVID-19 implications on regional (re)insurance sector

| 27 Mar 2020

As the coronavirus outbreak continues to wreak havoc across the world, businesses are frantically looking at how to manage supply chain risk and disruption.

(Re)insurers will have to assume some of the risk and loss from insureds as capacity-providers under certain coverages, said BSA Ahmad Bin Hezeem & Associates partner and head of insurance Simon Isgar. 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 offer protection such as a force majeure clause, Mr Isgar said. In addition, all insurance coverage should be reviewed and analysed to explore whether, and to what extent, the policy would respond to the COVID-19 outbreak.

Some insureds have relied on cover such as properties all risk or financial lines insurance which may not be appropriate for the coronavirus outbreak. Instead, they should have had business interruption (BI) cover.

For BI coverage to respond to any form of virus outbreak, it will need to include a ‘notifiable diseases’ extension in the policy terms or additional endorsement, Mr Isgar said. This is then normally triggered by government/ministerial orders. Many BI insurance policies do not include these provisions and specialist insurance advice should always be sought, he said.

Businesses with financial lines 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 polices would not respond, but for their failures in taking or not taking certain measures.

Medical and travel insurers may need to review current capacity with their reinsurance arrangements, where many of those policies will need to respond to claims unless otherwise excluded with the primary insurance coverage.

Mr Isgar expects the coronavirus will trigger litigation, insurance claims and coverage disputes in 2020 and beyond, and this will have implications for the global insurance market and capacity.

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