Managing Business Interruption insurance in a COVID-19 world

Published on 16 June 2020 

For most businesses, their Business Interruption (“BI”) insurance renewal this year will be far from business as usual. Navigating the renewal process correctly is essential if risks are to be transferred appropriately as and when expected. The challenges of getting BI insurance right has been amplified by the economic uncertainty stemming from COVID-19. Businesses are now looking at revenue reporting and forecasting from a newfound perspective.

As we look to the next 12 months (a typical insurance period), and a further 12 or 24 months (typical indemnity period), forecasting future revenue to calculate BI declared values is becoming increasingly difficult, with the task being clouded by an additional layer of complexity from COVID-19. This has prompted businesses to ask questions such as:

• Should we be insuring the government stimulus we have/are receiving?
• How long will the economic impact continue for?
• How long will social restrictions be in place for, and how will relaxing of restrictions impact operations and revenue?
• What impact will a “second wave” of infections have?
• When will a vaccine or treatment be developed, if at all? How will this impact businesses?
• If the virus mutates and becomes more contagious, what will be the economic and/or business impacts?
• Is my BI insurance worth the cost? Should I consider reducing or cancelling my BI cover?

With these questions in mind, Marsh explores the potential implications of reducing/cancelling BI cover, look at some of the key levers of calculating appropriate declared values, and share some practical tips to help organisations navigate through the renewal process and make informed decisions during uncertain times.