BY DAVID E. SILVA
Usually, after a bad typhoon I am asked to contribute to articles about how the typhoon impacted the insurance industry and what to expect moving forward.
And although the power is not out, trees are not down or cars flipped over in parking lots, our airport is shutdown with no tourists in sight, businesses are closed and citizens are anxiously waiting for Condition 4 to be called so they can go out an assess the damage and more importantly, get back to normal. The Covid-19 pandemic is a perfect storm and – a huge economic impact is following. So, what about insurance?
The first thing am sure you want to know is, “Is Pandemic even covered by any of my insurance policies?” What about the business shutdown? If it is was a typhoon, you’d either have bought typhoon insurance or not. Looking at common property policies though, covering businesses from large hotels to small businesses, the unfortunate answer is likely not.
Property insurance is designed to cover physical loss to property from things (we call them Perils) like Fire, Typhoon, Earthquake, and Vandalism, to name a few. A pandemic is not in the list of usually covered perils, nor does it cause physical damage to property. The harder answer that I’ve had to share with clients of all sizes is, “Because the pandemic didn’t cause a direct loss to your property, the business interruption cover (if any) was not also triggered.”
Is it even coverable? Virus & Bacteria are common exclusions to such policies, but even if they were somehow covered, the virus would have to cause damage to the property for a claim to be valid. As for Business Interruption, without a direct loss to covered property, Pandemic Insurance is provided by a select few insurance companies on a very limited scale. Such a risk was not on any radars prior to this Covid-19 event, but it certainly is now.
We’re already sourcing companies that might support clients who’d want to consider this coverage. Unfortunately, because the Covid-19 event has already started, insurance companies will not cover any of the current effects.
As for other common business insurances, workmen’s compensation and general liability, we consider that, with businesses opening, employees will want to know that it is safe to go to work. Workmen’s Compensation insurance is designed to cover work related injury or disease. Current safety guidelines, personal hygiene and business sanitation measures should be employed to curb the virus spread. If it can be shown that an employee was infected from their work environment, this insurance should respond to cover related medical costs.
Err on the side of caution with mask use, proper PPE, hand sanitizers at points of entry and work stations, partitions and strict general cleaning in community areas.
General Liability risk is a little more tricky. Since you can’t see the virus, you can only follow best practices and take reasonable measures to protect customers and visitors to your establishments. Again, following current safety guidelines and increased business sanitation are likely the best that you can do. The cleaner the better, I suppose will be the new norm.
Will it affect premiums? Not specifically. We were still seeing premium increased related to Yutu and reinsurance pricing increases caused by fires in the states and Australia. Since stock markets were so heavily impacted by Covid-19, insurance company investments included, the cost of insurance capacity is likely to harden, meaning you might expect premiums to increase in the near future. The pandemic is affecting all industries of all sizes.
Importantly, the current economy has all businesses looking at cost cutting measures. Insurance brings great value if bought properly and from the right carriers. Don’t be so quick to slash away at your insurance programs. A fire, a slip and fall accident and even a typhoon are all still in the realm of possibility, regardless of all the other things going on that are COVID-19 related.
Fortunately, everything is cyclical, and after a few years without more typhoons, rates soften, pricing gets better and things somehow get back to normal. You should consider the pandemic risk for your business and reach out to your insurance professional to ask how your insurance program might include such coverage.
We are a resilient people and can look forward to brighter days to come. In the meantime, stay safe, wash your hands and open your business as soon as you can. mbj
— David E. Silva is the general manager for Micronesia of AB Risk Solutions, an Aon Correspondent Office. He can be reached at