Covid-19 is leaving an unstoppable imprint across global businesses – Sister title, Insurance Times reviews the current lay of the land in the industry sectors most affected

Coronavirus or Covid-19 is having an unprecedented impact on daily life for both individuals and businesses.

Organisations across a multitude of sectors are struggling to get to grips with the snowballing effects of the outbreak, with industries such as tourism, leisure, hospitality, consumer goods, retail, supply chain, pharmaceutical, transportation and manufacturing all halted in their tracks by the devastating spread of the virus.

Many businesses within these sectors will be turning to their insurers and brokers for support and answers at this difficult time, yet what can the insurance industry offer commercial clients in these unknown waters?

Jody Thirkell, claims director at Romero Insurance Brokers, sums up the sector’s conundrum: “The harsh reality is that most avenues of cover are not open to this type of incident.

“Our feeling is that the insurance industry will not be in a position to ‘pick up the tab’ for most losses suffered, and thus managing expectations at this uncertain time is key.”

And managing expectations is certainly easier said than done – many customers are rummaging among policy paperwork to not only source which insurance product might be able to help, but also double-checking policy small print to see where Covid-19 impacts could possibly be insured.

For this reason, both Thirkell and Danny Stanvliet, head of analytics at Stubborn Edge, have yet to see a valid claim linked to coronavirus.

Supply chain

One of the key industries to be affected by coronavirus is supply chain and logistics, especially concerning the ports in China, such as Shanghai and Hong Kong, as well as cargo ships that have visited Chinese regions within its routes.

Jonathan Moss, head of marine and trade at law firm DWF, said: “No doubt, there will be an increase in business interruption, credit risk and cargo claims as purchasers along the supply chain are compromised by non-delivery, and obligations stipulated in sale and supply agreements that are not respected will also give rise to insurance disputes.”

Moss continued by listing potential issues facing this sector, for example, underloaded vessels mean that shipowners are receiving less profit, impacting not only on the ability for them to pay fuel costs, but also whether they can cover premiums for hull and machinery insurance in the event that the marine market begins to harden.

Furthermore, shipowners unable to meet contractual obligations under their charter party, where the shipowner hires out the vessel’s capacity, could trigger freight, demurrage and defence claims, or claims under charterers legal liability cover. This is in addition to potential claims around cargo interests, where cargo has not been shipped under bills of lading – which acknowledges carrier receipt of cargo – or claims under shipowners’ freight and cargo policies.

“Whilst some policies may pay out, epidemics and pandemics are usually excluded from standard insurance policies,” Moss added. “As such, it is likely that container ship companies, as well as ports and other insureds, will be forced to absorb billions of dollars of losses.”

Delayed delivery of goods is also unlikely to be covered under business interruption (BI) insurance, said Thirkell.

“Most business interruption policies will carry an ‘unspecified customers’ extension as a minimum, whereby any loss of gross profit incurred by the insured as a result of ‘damage’ occurring at their customer’s premises will be covered,” he said.

“However, the relevant trigger for cover would be ‘damage at the customer’s premises’. Often, ‘damage’ is a defined term within the policy and it is unlikely that an outbreak of a virus would constitute ‘damage’. The BI section would not trigger and the loss would effectively be uninsured.”

Although these businesses may suffer financial losses, at least they can benefit from the legal protections of force majeure, which prevents businesses from being held liable for delays – force majeure is broad enough to include the coronavirus pandemic.

Event cancellation

Another industry to be affected by coronavirus is leisure, and in particular event operations as organisers seek to eliminate mass gatherings that could further spread coronavirus.

Thirkell said that if an event or conference is cancelled, then the only applicable cover would be if an insured’s BI policy had a murder, suicide or disease extension. However, this is not a watertight solution - if an insurer’s small print details the specific diseases it covers, then Covid-19 would not feature on this list, so would not be insured against.

Stanvliet added that event or contingency insurance will generally cover financial loss due to triggers beyond the control of the insured, but only if the trigger results in the necessary cancellation or postponement of an event. Again, these policies can include ‘disease’ or ‘epidemics’ exclusions though.

“The key to triggering a claim is to establish that the cancellation is beyond the control of the insured. As for Covid-19, the policyholders would hope that the policy will respond where, for example, an event is cancelled as a precaution. But, this is not likely to be the case unfortunately,” he continued.

Thirkell agreed: “Public anxiety alone will not suffice as a policy trigger when it comes to closing down your business operations.”

Travel insurance

Naturally, customer demand for travel insurance has hit the roof as the Covid-19 risks have escalated and many countries have closed their borders – flight cancellations and delays have now become commonplace.

Corresponding with this, aggregator GoCompare noted a 277% jump in travel insurance sales last month over the course of just one week. Big brand insurers such as Aviva, Direct Line and LV= have also informed consumers that they are no longer selling travel insurance to new customers in a bid to attempt to control the coronavirus outbreak.

Stanvliet confirmed: “For the most part, Covid-19 would not be covered under your travel insurance policy. Policy wordings will have general exclusions and should a general exclusion apply, this means that your travel insurance policy would not provide cover for the specified event or circumstances. If the trigger relates to Covid-19, then the general exclusion will apply and cover will not be provided.”

David Scott, partner at Horwich Farrelly, however, raises a different concern – where travellers attempt to make a claim against airlines, hotel owners or tour operators for contracting coronavirus while abroad.

“For more than a month, the travel industry has been hit with travel restrictions and cancellations, however, with no sign that the coronavirus is under control, it’s entirely foreseeable that this epidemic will have sizable ramifications in an industry still shaken by the collapse of Thomas Cook,” he said.

“Whilst the industry should be braced for the inevitable influx of claims, determining whether a claim is genuine or fraudulent will be key – especially at a time when cash flow has never been tighter.”

Scott added, however, that the emphasis in these cases would be on the claimant to prove negligence, not on the tour operator or travel company to disprove the claim.


Stanvliet, however, delivers the sting in the tail for insurance firms seeking a solution to help their clients.

“I don’t think there is anything that can be done by insurers or brokers,” he said.

“In the product design stage and for a risk to be insurable, the consequence [or] claim payable needs to be financially quantifiable, the probabilities known along with the ability to pool a large number of similar risks.

“In the case of epidemics, none of these criteria can be met, hence why insurers designed their products with specific exclusions.

“The agents selling insurance policies need to ensure that the insured knows exactly what events can trigger a claim.

“Ultimately, I believe the government will absorb most of the losses relating to Covid-19.”

In terms of business interruption cover, Thirkell added that organisations’ only hope is the ‘denial of access (non-damage)’ insurance.

He explained: “This is cover for restricted, hindered or denied access to the premises from where the insured trades, which subsequently affects the business. This has to arise directly from actions taken by the police or statutory authority and due to an event or disturbance within a certain radius, specified usually within the policy, of the premises.

“Our advice to clients is not to voluntarily close their businesses unless they are strictly forced to do so by such an authority.”


How are insurers as a business affected?

But what about the insurance sector itself? Are insurers and brokers feeling the pinch points created by coronavirus?

According to independent commercial insurance firm Mactavish, “the overall impact of coronavirus on the insurance sector could be more devastating than 9/11” as the disease could potentially have a domino effect on insurers’ investment businesses – this could leave them relying solely on underwriting profits to stay afloat.

Mactavish chief executive Bruce Hepburn explained: “For insurers, the impact on the investment landscape will be more pronounced than coronavirus itself.

“It could see insurers increase their premiums to recoup poor returns and improve their cash reserves, reject more claims, slow down the process of settlements, and stop providing cover in certain markets. They may also include more restrictions on the policies they do underwrite.

“The overall impact of coronavirus on the insurance sector could be more devastating than 9/11.

“We predict that insurers will now move to a model in which their businesses are primarily sustained by underwriting profits, rather than the traditional combination of underwriting and investments.

“Prior to the emergence of coronavirus, insurers were already coming under considerable pressure and we were already seeing the classic symptoms of a hard market - coronavirus has just made this situation worse.

“In the long run, this could herald a seismic transfer of risk back onto companies who will in turn be forced to allocate more of their own capital to protecting themselves against high-severity losses, limiting their activity and ability to create returns for shareholders.”