The COVID-19 pandemic has had wide-ranging economic impacts, causing lost revenues and creating liquidity challenges. As organizations weigh tactics to sustain through the current crisis and avoid a cash crunch, it’s important to consider options beyond cutting costs and streamlining processes. Strategically approaching the insurance risk program can be a vital method to unlock liquidity by maximizing potential recovery, recouping premiums and refreshing the insurance risk strategy.

Potential Recovery
Many organizations face unprecedented disruption to operations because of the pandemic, including stay-at-home orders and the shutdown of non-essential businesses, and there is a lack of muscle memory for dealing with insurance under these unique circumstances. It is critical for organizations to identify the existing and potential insurable losses, document and calculate all losses, and file a claim with their insurance company. Doing so in a timely manner helps protect liquidity by preserving your rights under the policy.

Although many insurers have indicated that COVID-19 does not fall under property insurance or business interruption coverage due to virus-related exclusions in the policy, that may not necessarily be the case. There is active litigation related to the clarity and consistency of policy exclusions for loss due to virus or bacteria, and potential legislative changes could also have widespread implications for insured organizations.

No two insurance claims are alike, because every claim has a unique set of circumstances. That’s why you need to review your coverage in detail—and examine the specific facts associated with the loss—to understand all possible areas of claims recovery that could apply. For example, there may be relevant manuscript policy language crafted specifically for your organization’s coverage. That raises the possibility that certain endorsements, ISO or insurance company-specific, are either absent or worded differently from the standard forms. There could also be other policy provisions that limit the application of the exclusion for loss due to viruses.

Other insurance coverage (e.g., executive risk, commercial general and excess liability, workers’ compensation, et al.) may apply as well.  We are seeing, and expect to see, many more claims against Directors and Officers for mismanagement, bodily injury for illness and death with a claim of negligence, and workers’ injuries due to the virus, to name a few.  These losses are potentially covered in one or more of your other insurance policies and can provide recovery relief for defense and indemnity costs.  Also, in the case of renewals for Claims Made policies, the impact of any COVID-19-specific exclusions should be examined and the implications on present and past coverage understood.

To maximize your organization’s potential recovery, each policy needs to be scrutinized for specific coverage grants and exclusions to determine coverage under the particular circumstances. Due to the complexity involved, engaging with an experienced specialist can help you analyze both the policy and the set of facts in granular detail.

Recouping Premium
Another method for reclaiming liquidity is by recouping part of the insurance premium. Due to efforts to slow the spread of COVID-19, there are far fewer drivers on the roads, which has led some auto insurance companies to give customers refunds on premiums. Why shouldn’t your organization get the same treatment if the exposure to risk has diminished?

Evaluating the underwriting data provided to the insurance markets at the most recent renewal can help identify how to recoup premium. If the pandemic has caused temporary business closure, reduced employee headcount or decreased sales, then the business interruption calculation has changed. This can justify a new assessment of the value for updated premium calculation. Several strategies can facilitate the reclamation of premium, including a mid-term policy negotiation, accelerating policy audits, evaluating loss reserves, revision of go-in exposure estimates or even policy cancellation and rewrite.

Key Questions to Ask Yourself:

Have you explored the availability of insurance for COVID-19-related claims?
Have you preserved your rights under your claims made D&O insurance policies?
Have you investigated a premium refund from your insurance company yet?
Do you have a strategy to lower premium cost with your pending renewal?

Future Preparation
A failure to prepare often leads to unfortunate consequences, so it’s crucial to plan for the future now. You can use this crisis as an opportunity to reassess the management of organizational risk going forward. There are numerous options for the insurance risk strategy, including reconsidering deductibles, limit selections and policy purchases.

Your organization can also reevaluate how it presents its risk profile to the insurance market—such as by restructuring, updating and expanding the underwriting exposure data about payroll, revenue, and business interruption values. This can generate competition among insurers on pricing and terms, thereby driving down costs. Another option is the utilization or expansion of alternative risk vehicles (including captive products). By reconsidering the strategy for managing organizational risk at this critical time, you can prepare the organization to reclaim liquidity in the future.

COVID-19 Insurance Risk Program Checklist
Maximize Potential Recovery

Assess the presence of all current and potential COVID-19 claims

Property Damage / Business Interruption
Pollution Legal Liability
Workers’ Compensation / Employers Liability
Fiduciary Liability
Directors & Officers Liability
Employment Practices Liability

Preserve insured rights in Claims Made insurance policies
Track external litigation and legislation that opens new recovery opportunities for your organization
Utilize the government COVID-19 stimulus programs
Track claim details potentially related to COVID-19

Recoup Premiums

Update underwriting exposure data (e.g., business interruption values, payroll, headcount, revenue)

Accelerated policy audits
Mid-term insurer negotiations
Policy cancellation and rewrite

Consolidate purchases of excess insurance capacity (e.g., shared limits for D&O, EPL, Crime and Fiduciary; multiple-year and single-limit policies)
Re-evaluate coverage limits purchased
Actively drive down self-insured and insured claim reserves

Prepare Your Insurance Risk Strategy for the Future

Restructure, update and expand underwriting exposure data (e.g., business interruption values, payroll, headcount, revenue)
Update your insurance risk strategy (e.g., deductible/retention/limit selections, policy purchases)
Compete your insurance brokers and insurance markets to drive down cost
Consider the use, formation or expansion of a captive insurance company

Strategize to Thrive
In the face of disruption and uncertainty, these insurance strategies form a key part of an effective organizational response. They can help to successfully reclaim liquidity in both the near term and long term, which puts an organization in position to thrive once the crisis subsides.