AM Best: Social Inflation May Impact Pandemic Business Interruption Claims (AM BestTV)

OLDWICK, N.J.--()--In this episode of AMBestTV, Samiksha Gupta, financial analyst, and Sam Hanig, senior industry analyst, both with AM Best Rating Services, said complex COVID-19 business interruption claims (BI) likely will be resolved in the courts. Click on http://www.ambest.com/v.asp?v=businessinterruption420 to view the entire program.

Gupta explained how the social inflation dynamic plays into COVID-19-related BI claims.

AM Best expects that insurers will likely suffer potential BI and related contingent BI losses until the pandemic dies down,” said Gupta. “This could produce a big increase in social inflation because of the complexity of BI insurance provisions, which may lead to coverage disagreements between insured and insurers. With the impacts of social inflation becoming more severe in recent years for insurers, legal judgments may be more unfavorable to the insurers than in prior years.”

Hanig said the courts will need to consider whether claims meet a physical loss or damage standard.

“In most instances, BI claims require physical loss or damage for coverage to be triggered,” said Hanig. “Presently, there are a number of pending litigations surrounding this exact question, and opinions differ. When it comes to COVID-19, the question of what it means to sustain physical damage is at the heart of the current court cases between insureds and insurers to determine if BI insurance should apply.”

Going forward, both analysts said the language used in insurance policies is becoming more specific, and consequently, less accessible to interpretation.

To access the full copy of the commentary, “Social Inflation May Affect COVID-19 Business Interruption Losses,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=295862.

Recent AMBestTV coverage includes:

  • Pandemic May Impact Sovereign Credit and Country Risks: Andrea Keenan, senior managing director, strategy and communications, AM Best Rating Services, addresses how AM Best considers the potential impact of sovereign credit and country risks on a company-by-company basis: http://www.ambest.com/v.asp?v=ambcountryrisk420.
  • Event Cancellation Insurers May Exclude Future Pandemics: Insurers that write event cancellation coverage are already beginning to exclude pandemic coverage going forward, said Samiksha Gupta, financial analyst, and Sam Hanig, senior industry analyst, both of AM Best Rating Services: http://www.ambest.com/v.asp?v=ambeventcancellation420.
  • Insurance Concerns for Hotels and Colleges Offering Pandemic Housing: Empty hotels and colleges taking on COVID-19 patients or those exposed to the virus may find their insurance policies do not cover the new risk, said Gigi Norris, co-leader of Aon's infectious disease task force, and George Zelcs, an attorney with Korein Tillery: http://www.ambest.com/v.asp?v=hotelsdorms420.
  • Former N.Y. Insurance Regulator: Pandemic Risk ‘Crying Out for National Solution’: Business interruption may join terrorism and flood insurance as risks needing federal backing, said Eric Dinallo, chair of Debevoise & Plimpton’s insurance regulatory practice and former New York superintendent of insurance: http://www.ambest.com/v.asp?v=dinallo420.

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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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Contacts

Lee McDonald
Group Vice President, Publication and News Services
+1 908 439 2200, ext. 5561
lee.mcdonald@ambest.com

Contacts

Lee McDonald
Group Vice President, Publication and News Services
+1 908 439 2200, ext. 5561
lee.mcdonald@ambest.com