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COVID-19 will drive “significant changes” to BI policy wordings: market survey

26th June 2020 - Author: Charlie Wood

67.6% of respondents to our comprehensive re/insurance market survey believe the COVID-19 pandemic will result in ‘significant changes’ to business interruption policy wordings.

This new COVID-19 market survey was undertaken in collaboration with our ILS-focused sister-site Artemis, and was a follow-up to our April survey.

survey-results-bi-wordingsWe received responses from hundreds of identifiable market participants, of which more than half have responsibility for, or provide input to, reinsurance and retrocession buying decisions.

That included 16 CEO’s, 15 CUO’s, 12 COO’s, 27 senior Board members, reinsurance buyers, senior underwriting executives, ILS managers, brokers and a range of service providers.

While COVID-19’s impact on the re/insurance space will require time to fully understand, the ambiguity of BI policy wordings is one area that seems to have already been exposed.

In fact, a review is currently ongoing by UK regulator FCA that is focused on obtaining legal clarity on policies connected to the pandemic, and is hoping to provide a “clear line” to resolve which claims are valid and which aren’t.

FCA’s Interim CEO Chris Woolard said recently that while some BI policies are paying out for virus related issues, others remain “within dispute” due to ambiguities in their wordings.

Outside of the 67.6% who stated a belief that COVID-19 will drive ‘significant changes’ in BI policy wordings, 21.6% expect a ‘moderate amount’ of change, while the remaining 10.8% said the effect will be ‘limited’.

It will certainly be interesting to see how the introduction of tightened, more transparent wordings will affect the market and how this will play into the broader spectrum of change that is on the horizon post-COVID.

An additional key finding of this latest survey was that the market broadly recognises the need for government supported backstop reinsurance schemes for future pandemics.

We provided additional analysis on the survey’s finding that COVID-19’s impact on the re/insurance industry could take 5 years to be fully understood.

We’ve made the full results of this COVID-19 re/insurance market survey freely available to our readers and we’re happy to discuss the results with industry participants and to discuss sponsorship enquiries from those looking to raise their profile in the reinsurance sector. Contact us.

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