The COVID-19 crisis has created uncertainty in a myriad of industries and insurance is no exception. In this rapidly evolving climate, it’s important for retailers to stay on top of market changes in order to help their insureds navigate the best risk management course. In this article, our industry specialists share overall themes in the Casualty market and take a closer look at how different market segments are being impacted by this pandemic.
While the market response to the pandemic is continuously evolving, most carriers are striving to be flexible and fair. However, few are willing to make blanket statements as to what measures they are willing to take to provide relief to their insureds. Most carriers have made commitments to extend payment terms, but exposure base reductions and policy extensions are being handled on a case-by-case basis. The most common concession carriers have made thus far is endorsing policies from a Minimum Premium perspective, which would potentially provide a return of premium to the insured upon policy expiration. As the pandemic evolves, we can expect carriers’ position on such issues to remain fluid.
Within the casualty sector, segments of the marketplace are responding to the crisis differently. Keep in mind that, even before the pandemic hit, the casualty industry was already being impacted by a wide array of factors.
At this point, construction insurance carriers are making few changes to policy terms and conditions, and the market is actually as close to “business as usual” as can be expected. Some are issuing Communicable Disease Exclusions, and few are saying “yes” to extensions. However, many markets have stepped up to the plate to help insureds during this time, including offering a Suspension of Operations endorsement and a Resumption of Operations endorsement, particularly on project policies.
Of course, for construction accounts themselves, it is hardly business as usual. How much work an insured is able to perform varies widely depending on the state. Most states have restricted construction to “essential” projects, although that can vary from a minimal definition of critical infrastructure, healthcare, and public projects to a broad definition including new home and business construction and even remodeling. Restrictions are toughest on the coasts: in New York state, construction has essentially been shut down, matching conditions that had been in place on the West Coast since the end of March. As a result, contractors have been slashing payroll and revenue estimates for workers’ compensation and general liability policies.
“We’ve seen clients cutting exposure estimates anywhere from 25 to 50 percent,” says Jett Abramson, AmWINS Executive Vice President. “And by and large, carriers have been willing to accommodate.”
Most real estate GL policies already contained a communicable disease exclusion, but some excess markets are now adding exclusions to their policies as well. Clients in this sector are bracing for the greater economic uncertainty faced by tenants. “We are all left wondering, what happens when tenants can’t pay their rent?” says Corey Alison, AmWINS Executive Vice President.
At the same time the real estate market is being hit with challenges from the pandemic, insureds continue to see no letup from insurers pursuing rate increases. The rate increases were occurring well before COVID-19, but the combination of the two is creating an even more challenging landscape. “As a way to manage rising costs, especially in building excess limits, lenders will be getting more pushback from owners to lower the limits required and, in light of market conditions, compromises are being achieved.” Alison says.
The manufacturing industry is facing a fear of the unknown as “non-essential” operations wonder when they will be able to resume and, once they do, what the near-term demand for products will be. As a result, insureds are requesting to reduce sales estimates, sometimes substantially. Some carriers have been willing to do so, and many are also offering lower minimum deposit premiums to help companies get through the cash-flow crunch and in expectation of lower audited sales at policy expiration.
COVID-19 has placed additional stress on manufacturers in already strained industries. “Some insureds have been forced to choose to between paying their operational bills, employees or insurance premiums,” said TJ Collins, AmWINS Senior Vice President. “With the lack of contractually required insurance limits in certain industries, coverage is often the first to go. We have seen multiple policies cancelled mid-term.”
There is a bright side in the sector, created by the ingenuity and adaptability of modern manufacturers. Operations have demonstrated the remarkable ability to retool their plants to create critical supplies: automotive companies and vacuum manufacturers are producing ventilators; clothing manufacturers and toy companies are making masks; distilleries are producing hand sanitizer.
“What’s on the mind of many manufacturers is how can they do good for the U.S. and try to help,” says Chris Pisani, AmWINS Senior Vice President. “However, if you are a small manufacturer or a startup, you probably don’t have the resources to retool. Those companies are on the sidelines waiting for the stimulus bill to kick in.”
While manufacturers are adapting and doing their part to battle the disease, there are underwriting concerns regarding potential products liability claims resulting from defects and rushed production. In these instances, as well as for overseas importers, carriers are asking additional questions including if the insured has experience making this type of product and what quality controls or inspections are in place. “Many go-to carriers in the manufacturing space are not willing to provide coverage solutions because of product quality concerns,” Collins added.
The food manufacturing industry is one of the few areas that has not had a major impact to its revenue stream during the pandemic. However, the typical supply chain for these manufacturers has been significantly disrupted, resulting in companies having to find new ways to obtain needed ingredients and other supplies. Purchasing ingredients from new suppliers presents many unforeseen issues including the potential to receive contaminated product, in which case the manufacturer could be responsible for the loss. “This is a risk all manufacturers face daily,” said Robert Balogh, AmWINS Senior Vice President. “As companies are forced to act quickly and make decisions to keep their plants running, more variables than ever factor into a company’s exposure.” Other perilous challenges facing food manufacturers include maintaining healthy workforces and keeping a focus on quality and food safety.
“We are seeing carriers work to make renewals as smooth as possible given the state of the world,” added Balogh. “However, some markets are taking a firm position regarding COVID-19.” Product Recall markets in London have started to add mandatory COVID-19 exclusions on all new business and renewals. These mandatory exclusions have not yet transitioned over to domestic markets.
“Submission flow has remained steady so far, but we expect new business to diminish in the near future as a result of COVID-19,” said Matt Carpenter, AmWINS Executive Vice President. Underwriters are already feeling affects from this change and are aggressively seeking new opportunities, which perpetuates a slightly softening market.
It has been the transportation industry’s time to shine during this crisis. “It has been nice to see an industry that often gets a bad rap getting positive publicity, as truck drivers are recognized for their efforts in delivering needed supplies. A significant impact we’re seeing from COVID-19 is that many segments of transportation are still necessary and, in fact, critical right now, including truckers hauling food, medical supplies, paper products, and more,” says Andrea Dickinson, AmWINS Transportation Practice Leader.
Conversely, other motor carriers are negatively impacted because their key shippers are closing down or have greatly slowing down, and thus, revenues are shrinking significantly and rapidly. Charter bus and leisure transportation units are being parked, as are units owned by carriers who haul for industries currently not producing new inventory, such as automotive manufacturing. For others, there is limited to no freight to be hauled, especially in intermodal operations that work ports for imported goods.
Primary auto markets have been more flexible around removing units from policies on a temporarily out-of-service status without providing the normally required documentation. Some are willing to lower minimums and deposits on policies. Some excess carriers are also following the lead of primary carriers in allowing these deletions.
When requesting changes to policies, retailers should provide as much information as possible. How many units are parked? Can the customer provide a detailed unit list with year/make/model/VIN? What percentage of a customer’s shippers are closed or at limited operating capacity? What change in annual projected miles and revenue are expected now? The more details that can be provided to underwriters, the more likely it is that accommodations can be made.
From a claims perspective, many transportation clients are reporting their best month in the history of their company from a frequency standpoint because roads are mostly empty. This has freed up nationwide bottlenecks and allowed those trucking companies that are moving essential goods to get to where they need to go faster and more safely. Likewise, insurance companies are already reporting a significant reduction in claims frequency.
Although the energy sector is not as affected from a coverage standpoint as other industries, some carriers are introducing an endorsement more specific to communicable diseases. “We are seeing some attempting to add a catch-all phrase for communicable disease on policies effective May 1,” says Heath Cunningham, AmWINS Executive Vice President. “Once the marketplace starts seeing this language being accepted, everybody is going to jump on the bandwagon.”
The price of oil and lack of oil production has impacted the Energy space in parallel to the world battling the COVID-19 pandemic. In response to this, energy contractors and businesses that provide products and services which support the energy sector are seeking to adjust their exposure if their renewal is imminent or cut back on their limits midterm as a cost saving measure. Some carriers are willing to work with the insured but are asking for documentation to support the adjustments.
During this pandemic, AmWINS is working closely with our carrier partners to understand their changes in operations and protocols, advocate for flexible payment terms, exposure basis relief and policy extensions when possible, and ensure as little disruption as possible with regards to servicing, claims, binders, endorsements, and renewals. We will keep our clients advised of any new market changes, renewal challenges and regulatory proposals that may impact our business.
Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
(c) 2017 AmWINS Group, Inc.
Employment practices liability (EPL) insurance in the U.S. marketplace has always been affected by social trends. This article explores the top factors influencing buyer behavior, product development and underwriting appetite associated with EPL coverage.
Warehouse Legal Liability is a complicated line with many gray areas and multiple interpretations of its coverages. This article discusses coverage triggers, legal vs. contractual liability and the importance of warehouse receipts.
In the current economic climate, many small businesses are struggling and some may even fail. Despite these challenges and the continued hardening market, there is opportunity for retailers to write and retain business. This article provides guidance on navigating the complex small business marketplace and helps retailers fine tune their understanding of what insurable risks will look like over the next 12 to 24 months.
Product recalls are one of the most damaging events a business may encounter. In order to effectively respond to an incident, companies must be prepared with proper risk management strategies. As policy wording varies, it's also critical to ensure your clients have the right policy type in place to appropriately address their first- and third-party exposures.
Court rulings, have extended the Americans with Disabilities Act (ADA) to apply to websites that are "heavily integrated" with and serve as a "gateway" to a physical stores/services. As a result, companies are now finding themselves targets for ADA claims based on the inaccessibility of their websites and media by those who are disabled.
Our Q2 2020 State of the Market report provides a holistic view of highly impacted industry segments as well as overall market trends. This report is designed to help our retailers gain the knowledge they need to retain accounts, write new business, overcome challenges and capitalize on opportunities that do exist.
Severe weather can be unpredictable and strike at any time. Help your clients be prepared in the event their property is damaged by a hurricane, tornado, hailstorm or similar disaster with these 10 catastrophe claim tips.
As a result of the COVID-19 crisis, our industry is facing a broad array of challenges that impact insureds of every size and in every industry. In the first of a series of webinars, we hear from an economist on the financial impacts of COVID-19 and what we can expect in the future. This webinar is intended to complement your conversations with clients about how to plan for the next 12 to 24 months.
This podcast features an update from John Neal, CEO of Lloyd’s, on the state of the Lloyd's market and their response to COVID-19 as well as a panel discussion with London Property underwriters on how they view the pandemic's impact both the Property sector and their syndicate's business.
This podcast features an update from John Neal, CEO of Lloyd’s, on the state of the Lloyd's market and their response to COVID-19 as well as a panel discussion with London Casualty underwriters on how they view the pandemic's impact both the Casualty sector and their syndicate's business.
This podcast features an update from John Neal, CEO of Lloyd’s, on the state of the Lloyd's market and their response to COVID-19 as well as a panel discussion with London Professional Lines underwriters on how they view the pandemic's impact both the Professional Lines sector and their syndicate's business.
Ninety-eight percent of all United States counties were impacted by a flood event in 2018, yet many property owners remain unaware of their true risk of flood or what their existing policies cover. This article highlights key statistics about flood risk and outlines the differences between the National Flood Insurance Program and private market flood insurance.
The COVID-19 crisis has created a rapidly changing environment for the Professional Lines market. With the uncertainty of how claims will develop and the potential for increased exposure, retailers must be proactive. In this article, AmWINS specialists share their insights on why this is more important now than ever, including reactionary underwriting trends, D&O policy exclusions and impacts to EPLI, as well as the threat for increased cyber attacks and crime losses.
Loss of revenue caused by stay-at-home orders due to the coronavirus pandemic has affected small businesses and the insurance industry serving them significantly. As retailers and carriers prioritize their focus to adapt to the “new normal” of daily transactions, underlying market dynamics remain unchanged. In this article, our experts share their insight on the current changes that we are seeing the small business and personal lines market, and how to navigate the market a this time of uncertainty.
The disruptive impact of the COVID-19 outbreak on supply chains is already having a pronounced effect on the world of logistics and logistics insurance. Port closures, demand surges and production shifts are requiring nimble response to keep up with change. This article arms insurance brokers with the information needed to understand the changes taking place and plan for what is likely to occur in the months ahead.
The Casualty market’s response to COVID-19 is continuously evolving. With a wide array of factors already impacting this sector pre-crisis, segments of the Casualty marketplace are responding to the pandemic differently. In this article, our industry specialists share overall themes in the Casualty market and take a closer look at how various segments are being impacted.
The COVID-19 pandemic is causing historical disruption to the construction industry. These changes mean that risk mitigation strategies need to be implemented or revisited, policy language should be reviewed, and carriers should be apprised of all changes at the work-site. In this article, AmWINS specialists examine the major areas of concern for Builder’s Risk insureds, including government-mandated shutdowns, supply chain-driven slowdowns and policy wording that could limit coverage, and provide guidance for retailers to achieve the best results for their clients.
For decades, the logistics insurance market has been considered a sub-market of the cargo or ocean marine market. However, the continual rise of e-commerce and its effect on the global supply chain has carved out a complex and expansive industry niche. This article provides insight into the various lines of coverage, the specialized underwriting approach, and rate surges within the U.S. logistics insurance market.
During the COVID-19 pandemic, Lloyd’s remains open for business and syndicates have successfully transitioned to working from home. However, there are notable changes in how the London market is approaching business. In this article, specialists from THB, AmWINS’ London broker, share their insight on consistent themes across the London Market as well as updates on various lines of business.
There have been a lot of questions regarding COVID-19, in particular about coverage and claims handling. This claims advice is intended to offer guidance to help our retail clients through these difficult times.