How Lloyd’s Canada says the industry can better prepare for the next time a pandemic causes business interruption

Lloyd’s is talking to Canadian government authorities about how business interruption risk, arising from a pandemic, can be transferred in the future.

“In Canada, Lloyd’s has talked to the federal finance department and different provincial government regulators,” Lloyd’s Canada president Marc Lipman said in a recent interview.

Lipman was asked whether business interruption, from a pandemic such as COVID-19, is truly uninsurable or whether is there a way the industry and government could change the way that pandemic BI risk is transferred in the future.

“Lloyd’s supports efforts, led by the Insurance Bureau of Canada, to try to make sure that industry and government can work together and be better prepared for the next time to be more responsive to customers’ needs,” said Lipman.

After the World Health Organization declared COVID-19 a pandemic in March of 2020, governments around the world brought in a variety of emergency measures intended to reduce the extent to which people congregate. Many businesses – including restaurants, retailers and event venues – sought business interruption coverage from their insurers. In many cases, the claims were denied. Often the insurers contended that the wording of those particular clients’ insurance policies required some form of property loss before business interruption is covered. Many coverage disputes are still before the courts.

“Lloyd’s understands that some business interruption policies did not perform as customers expected during the pandemic. That, in and of itself, is a significant problem and has to be addressed,” Lipman told Canadian Underwriter.

“Not all, but many business interruption policies in Canada are triggered from some sort of physical damage of property at the premises or place of business. This has certainly highlighted a need in the industry to address non-damage business interruption coverage,” said Lipman, a former chief operating officer of American International Group (AIG) Canada. In early 2020, Lipman was appointed president of Lloyd’s Canada and attorney-in-fact in Canada for Lloyd’s Underwriters.

It should not take sophistication to understand business interruption products and policies, said Lipman.

In 2020, Lloyd’s proposed a set of open-source frameworks – meaning anyone could use them and modify them – on how to build resiliency and be ready for future shocks, black swan events and risks, said Lipman. This is so Lloyd’s can enter into discussions with governments to support economic recovery from the pandemic.

“Some sort of partnership between the insurance industry and government will be vital to respond to widespread and catastrophic losses,” said Lipman. For example, if you think about the global COVID-19 pandemic, there was no way that the insurance industry could have responded to that on its own. The global non-life insurance industry has about US$2 trillion in capital standing behind it, to pay all of its claims. The International Monetary Fund has recently estimated that governments injected more than US$14 trillion into the global economy in 2020. So, the insurance industry cannot do it alone. I think the industry can be a critical partner with government.”

Feature image iStock.com/Maria Stavreva