Some States Still Weigh Mandating Business Interruption Coverage

By | March 16, 2021

  • March 16, 2021 at 9:53 am
    Old Dog says:
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    What about those pesky war and NBC exclusions? Shouldn’t those be addressed as well?
    Can US legislators demand reinsurers in London, Bermuda, and elsewhere provide treaty coverage, and if so, at what price?
    Will solvency regulations have virus exceptions to aggregate exposure analysis?
    If solvency issue is to be ignored for virus, for what other perils should we do the same?
    Does the number of people infected, or potentially infected, change the physical damage to property? Will there be a scale, like for hurricanes and earthquakes?
    Could I comply by offering a separate policy just for virus, and keep records of declination on file? What if they decline: Will the policyholder bond rating reviews be required to analyze whether the policyholder has adequate virus cover – and how will those ratings be compared to their global competitors who don’t have such a requirement?
    Or are these bills just clickbait theater?

  • March 16, 2021 at 12:05 pm
    CarrierGuy says:
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    The insurance industry really ought to get the rest of the business sector to recognize what’s being threatened here. The government is proposing to retroactively rewrite ANY contract and throw out ANY provision if if doesn’t seem very nice to them. That wouldn’t just up-end the insurance industry, it throws the very basis of commerce into chaos. Parties won’t know if their contract will mean what they write, because next year’s legislators can enforce their own notions of what seems “fair.”

    The other thing about this: these businesses were not closed by the virus. They were closed by governments in a futile attempt to control the uncontrollable. None of these businesses can point to evidence: “see here, here’s the virus on my counters, that’s the damage that triggers coverage” because that wasn’t the cause. Imagine if business interruption policies offered coverage, not for pandemics, but for “any time the government decides you shouldn’t be in business right now.” I’d sell you a $1M cover for it, but the premium would be $1M.

    • March 16, 2021 at 1:23 pm
      Rosenblatt says:
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      “The government is proposing to retroactively rewrite ANY contract and throw out ANY provision if if doesn’t seem very nice to them”

      I presume you’ve been working in Insurance for a little while, yes? Why are you surprised? States do this ALL THE TIME already: like when FL says “don’t apply the hurricane/wind percentage deductible on a named hurricane that made landfall in the state – just apply the standard deductible” they’re rewriting the terms of the contract and throwing out the wind/named storm deductible provision.

      • March 19, 2021 at 12:17 pm
        James says:
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        Doesn’t make it right.

  • March 16, 2021 at 6:25 pm
    John says:
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    This coverage should be with the federal government with the NFIP program. I would prefer to not have to handle ‘pandemic’ losses as a carrier. It would be a lose-lose-lose situation for carriers.

    The governments would provide moving targets for coverage triggers and compensability. The trial attorneys would, still, have the courts clogged with ‘bad faith’ actions and some court’s will have become advocates against the carriers.

  • March 16, 2021 at 8:01 pm
    Boonedoggle says:
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    I disagree with the premise that pandemic risk is not an insurable loss. With the 2020 business loss data available, actuaries certainly should be able promulgate an adequate premium requirement. Let the decision of whether or not to buy the coverage at the established rate be just another business decision for the insureds. I can remember many decades ago when actuaries calculated a premium for retroactive liability insurance for the MGM Grand Casino in Las Vegas, following a disasterous fire. If they could make that calculation, actuaries certainly should be able to appraise pandemic risk. Obviously reforming existing policies to cover pandemic or virus risks shouldn’t fly as it is confiscation of property (insurer’s bank accounts) without due process of law.

  • March 17, 2021 at 7:35 am
    Shadowfax says:
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    Several issues here: first. the actions from these states is political – like wanting to mandate flood coverage on HO policies after the hurricane becuase people are hurting. if the states (or feds) want to backstop uncovered claims to help people they should – but not through voting to pay non-contractural damages. Second; BII pays for loss to business income due to direct physical loss to covered property from insured perils. That is not what happened. Third; I disagree a bit with Boonedoggle only in that one pandemic event does not give us sufficient frequency and severity data to do anything from an actuarial persepctive – any “rates” developed would be more speculation than data-driven. We face these same issues wil Flood, Terrorism and Crop loss due to scale of loss, unpredictability of precipitating events and numer of claimants. I don;t doubt that a limited form of pandemic coverage will emerge, but would it be enough for over a year of loss???

  • March 19, 2021 at 12:19 pm
    James says:
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    The federal government has no business insuring this risk. The so-called pandemic is about as deadly as the flu, so it’s a health insurance issue.

    • March 19, 2021 at 1:33 pm
      James says:
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      Meanwhile, there are much bigger stories than COVID-19 should have ever been.
      https://www.insurancejournal.com/news/national/2021/03/10/604691.htm (Solarwinds)

    • March 19, 2021 at 2:34 pm
      Bill says:
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      I don’t recall a year with over 500,000 deaths due to the flu. COVID-19 is far deadlier than the flu.

      • March 28, 2021 at 8:53 am
        BillToo says:
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        You couldn’t possibly recall the Flu Pandemic of 1918.
        The Wuhan Flu has a U.S. death rate of 1.8%. A diagnosis isn’t exactly a death sentence.

  • March 22, 2021 at 10:43 am
    ml says:
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    Handle it like TRIA; charge the premium and then they accept or decline. Adjust premiums concurrent with baseline “loss exposures” to date.



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