Navigating the impact of COVID-19
How to manage insurance claims
A number of insurance products may become relevant in the context of the COVID-19 outbreak.
- force majeure insurance, which covers claims where a project cannot be completed due to events beyond the insured party’s control;
- business interruption insurance, which covers general disruption in the supply chain;
- political risk insurance, which allows claims for loss of assets, income or property due to political events, or governmental action or inaction; and
- performance of contract bonds, which insurers may issue to parties or banks as a guarantee against the counterparty failing to perform.
Some insurance policies do not operate in the event of epidemics/pandemics and expressly exclude losses caused directly or indirectly by them.
Since the SARS epidemic, many insurance policies, especially in the US, also exclude cover relating to bacterial or viral infections.
If insurance policies do not operate, there is a serious risk of financial stress and related litigation for insured companies (eg airlines/cruise companies bound to reimburse their clients but not able to get indemnification from insurers).
Claims may arise as follows.
- Serial claims against insurance companies for payment of indemnities.
- Possible claims against insured companies where insurance policies do not operate (eg due to an express exclusion of damages directly/indirectly caused by epidemics/pandemics).