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Exclusions will limit coronavirus BI impacts

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Exclusions and policy trigger rules are expected to curb potential insurance losses from business interruption claims related to the coronavirus epidemic.

Outbreaks of SARS in 2003 and the Middle East respiratory syndrome epidemic that followed have contributed to policy changes that will make it difficult for firms to make claims, Leon Briggs, Head of Forensic Advisory Services New Zealand at major loss adjuster Sedgwick, says.

“You struggle to see a wide volume and value of claims, certainly in Australasia,” he said.

Some business interruption policy wordings may provide a degree of cover, but more generic policies in the marketplace suggest it would be difficult to make a claim.

Exclusions include any infectious animal or human disease, while limitations based on notifiable diseases should now be in effect for the coronavirus, now officially known as COVID-19.

Triggers for business interruption typically require property damage or contingent impacts such as lack of access, loss of utilities or other circumstances that insurers view as reasonable to cover.

“The extent of how this event could cause loss to so many customers at once gives an aggregation risk or exposure risk to insurers that is not like an earthquake risk, or even bushfire,” Mr Briggs said.

“Logically you can see why [insurers] wouldn’t want to pay for something that in the worst case scenario is going to affect every business.”

Mr Briggs says large multinationals could have bespoke arrangements to cover virus impacts on supply chains to some extent, but similar restrictions and trigger issues may apply.

AM Best says in a report on Southeast Asian insurers that potential direct impacts include medical, personal accident, mortality, travel and business interruption claims.

“The low number of COVID-19 cases in Southeast Asia, epidemic policy exclusions and governments’ undertaking of diagnosis and treatment costs are some of the factors likely to limit the potential loss outcome for the insurance industry,” it says.