Category Archives: Emerging Risks

Climate Risk Is Not a New Priority for Insurers

Treasury Secretary Janet Yellen’s pledge to tackle climate change and warning about the economic consequences of failure to act underscore the fact that climate is no longer “merely” an ecological and humanitarian issue – real money is involved.

As long as climate was perceived as a pet project of academics and celebrity activists, driving behavioral change – particularly on the part of industries with billions invested in carbon-intensive technologies and processes – was going to be an uphill effort. But the Titanic has begun to turn, and no industry is better positioned than insurance to help right its course. Insurers are no strangers to climate-related risk – they’ve had a financial stake in it for decades.

Let’s look at the facts:

Global insured weather-related property losses have outpaced inflation by about 7 percent since 1950. Of the $1.7 trillion of global insured property loss reported since 1990, a third is from tropical cyclones, according to Aon data. Nine of the 10 costliest hurricanes in U.S. history have occurred since 2004, and 2017, 2018, and 2019 represent the largest back-to-back-to-back insured property loss years in U.S. history.

Determining how much such losses are driven by climate versus other factors is complicated, and that’s part of the point.

“I know some have argued that this is a reason for us to move slowly,” Yellen said. “The thinking goes that because we know so little about climate risk, let’s be tentative in our actions—or even do nothing at all.  This is completely wrong in my view.  This is a major problem and it needs to be tackled now.”

Understanding the complexities of weather, climate, demographics, and other factors that contribute to loss trends requires data, analytical tools, and sophisticated modeling capabilities. Insurers invest heavily in these and other resources to be able to assess and price risk accurately. As a result, they’re uniquely well positioned to inform the conversation, drive action, and present solutions. 

And they’re leading by example.

Chubb Chairman and CEO Evan G. Greenberg is among the industry leaders who has been on the forefront of communicating about climate risk. When Chubb announced that it will not make new debt or equity investments in companies that generate more than 30 percent of revenues from coal mining or coal energy production, Greenberg said, “Making the transition to a low-carbon economy involves planning and action by policymakers, investors, businesses and citizens alike. The policy we are implementing today reflects Chubb’s commitment to do our part as a steward of the Earth.”

Swiss Re last month announced a similarly ambitious carbon reduction target of 35 percent by 2025 for its investment portfolio. Zurich Insurance Group last year announced the launch of its Climate Change Resilience Services to help businesses better prepare for current and future risks associated with climate. Aon annually publishes its Weather, Climate and Catastrophe Insight reports.

These are just a few examples of how the insurance industry already is recognizing its stake in addressing climate change and providing resources to help others attack the problem.  

Cannabis Industry Prospects Brighten;
Risks, Challenges Remain

The future looks brighter every day for the cannabis industry.

From recent findings that cannabis components may lead to treatment or even prevention of coronavirus infection in lung cells to yesterday’s vote by the House of Representatives in favor of the Safe Banking Act, barricades to full legalization just keep falling.

This isn’t the first time the act – which would protect banks from federal penalties for doing business with cannabis-related businesses that comply with state laws – has made it through the House. It was first introduced in March 2019, and the House has approved it three times, only to have the Senate Banking Committee block its progress. But with the current Democrat majority, apparent bipartisan support, and growing public and state-government support for cannabis legalization, the fourth time just might be the charm.

Similar federal “safe harbor” legislation for the insurance industry – the Clarifying Law Around Insurance of Marijuana Act (CLAIM Act) – was introduced last month.

“More optimism”

The Drug Enforcement Agency characterizes cannabis as a Schedule I drug, defined as having “no currently accepted medical use and a high potential for abuse.” Without legislative change, banks and insurers can’t do business with business without risking running afoul of federal drug laws.

“There’s more optimism now and an assumption that they’re going to work to pass some of these bills that have been in motion for a while now, but never hit the point of actually moving forward,” said Max Meade, cannabis insurance advisor at Brown & Brown Insurance. “I’m also seeing more conversations around working to bundle some of these bills that they’ve been talking about and do a larger cannabis reform.”

As states continue to decriminalize marijuana to different degrees, one of the biggest issues facing cannabis businesses is the 280E federal tax burden, which means cannabis businesses can’t expense the normal cost of goods or anything a normal business can during the course of operation, from utilities to payroll and rent. This means marijuana businesses often pay federal income tax rates in the 65–75 percent range, compared to 15-30 percent  for other businesses. They are taxed on their gross revenues, unlike all regular businesses, which pay tax only on income after their expenses.

The Small Business Tax Equity Act would provide an exception into the Internal Revenue Code to let cannabis operators – as long as they’re in compliance with state laws – make the same deductions as any other business.

Easier to operate

Passage of these laws would make it easier for cannabis-related businesses to operate. The CLAIM Act would let these businesses obtain insurance to cover the same risks of theft, damage, injury, loss, and liability as all other businesses.  

“There are upwards of 30 surplus lines carriers and several managing general underwriters that currently service the cannabis industry across many lines of coverage,” the National Law Review reports. “There also is a small handful of admitted carriers that operate in California, and most recently in Arizona.”

While market capacity for property, commercial general liability, product liability and workers’ compensation coverage has expanded – these policies remain more expensive than the same coverage purchased by similar companies in other industries. Passage of the CLAIM Act would open the doors for more insurers and should bring the cost of insuring marijuana-related businesses much less expensive.

THC persistence a challenge

But challenges will remain – particularly with respect to the workplace. When marijuana was illegal under both state and federal law, employers would typically prohibit employees or employment candidates from using marijuana off-duty as a condition of employment. But as states have begun to permit medical marijuana, things have gotten a bit hazier.

No state requires companies to accommodate on-duty marijuana use. As with recreational marijuana, no state that permits medical marijuana requires employers to accommodate on-duty marijuana use, possession, or impairment. States will often explicitly state that medical marijuana laws don’t affect an employer’s drug-free workplace policy.

Does workers compensation cover a workplace accident in which the injured employee tested positive for marijuana? Persistence of THC – the main psychoactive compound in marijuana – complicates this question, and state courts have differed on this issue, depending on the individual details of each case.

THC persistence also complicates issues around impaired driving.

“Lightning Round” Highlights Technologies Reopening the Economy

Public discussion about re-opening the economy after COVID-19 has mostly revolved around the safety, efficacy, and availability of various vaccines. But in the longer term, other measures and new technologies will be key to getting back to normal and being prepared for future public health emergencies.

Last week’s Lightning Round V: Reopening America in the Post-Pandemic Scenario – a collaboration between Triple-I’s Resilience Accelerator, ResilientH20 Partners, and The Cannon – featured three technologies that promise to help facilitate the recovery.

Workplace workflow

Tomer Mann, executive vice president of business development for 22 Miles, discussed his company’s “digital experience platform,” which incorporates temperature-scanning technology, touchless kiosks, virtual concierge, and other applications to provide social distance among customers and employees and early warning of possible infection in business settings.   

“In March, when we were seeing a lot of the temperature-scanning solutions coming out of China, we realized we could leverage our software to pivot and create a more secure solution, avoiding some of the sensors that are coming out of China that are blacklisted in the trade market and avoiding some of the data breach implications,” Mann said.

22 Miles’ “workplace workflow” starts at a building’s lobby, using facemask and temperature detection and including badge integration and access control for employees and guests. For companies using shared workspaces, the system tracks what spaces are being used to facilitate sanitization between uses. To minimize physical contact while maximizing interactivity, the system’s components can be activated using voice, gesture, or mobile device.

In addition to facilitating safe, hygienic use of these spaces, the system captures large amounts of data that can provide warnings of possible infections and inform modifications to the workflow.

Scrubbing the air

Santiago Mendoza, senior vice president with Integrated Viral Protection, spoke about his company’s indoor air protection system, which has been shown to capture and destroy coronavirus at a 99-plus percentage rate. The system has shown similar results when tested with anthrax spores and other airborne pathogens.

Heating, ventilation, and air conditioning (HVAC) systems are “super spreaders” of coronavirus and other pathogens, Mendoza said, adding that most filter systems only catch and don’t kill them. 

“Our system heats up to almost 400 degrees Fahrenheit and destroys the pathogens,” he said.

The IVP system is available for commercial and residential uses and has been installed in hospitality venues, health facilities, and schools across the United States, Mendoza said. It comes in multiple sizes, including a personal unit for travelers to use in hotel rooms and other closed spaces.

Early warning in water

Jennings Heussner, business development manager for BioBot Analytics, a wastewater epidemiology company, explained how BioBot went from testing for opioids to tracking coronavirus.

“We analyze wastewater coming into treatment plants for human health markers,” Heussner said. The company originally was focused on the opioid epidemic, helping communities better understand the nature of their local opioid problems to better inform their public health response.

When the pandemic hit, BioBot expanded its focus and became the first company in the United States to identify the presence of the virus in wastewater.

Leveraging existing wastewater sampling processes, BioBot analyzes the sample and reports back within one business day after receiving it, providing a quick, inexpensive, comprehensive early warning system.

Ready and resilient

Such technologies will be essential parts of building a pandemic-ready and resilient society. Anticipating and addressing outbreaks early can help alleviate health-related and business-interruption concerns and head off insurance claims.

Just as the insurance industry played a vital role in improving vehicle safety, infrastructure, building codes, and more, insurers and risk managers – partnering with policymakers, businesses, homeowners, and others – will help determine which of these emerging solutions will endure.

Virtual Triple-I Forum Reviews 2020, Looks Ahead at Risks, Opportunities

Sean Kevelighan, Triple-I CEO

Insurance is a business that promotes and demands resilience, and 2020 was a year-long case study in our industry’s ability to respond rapidly to new challenges from a firm financial foundation. Triple-I’s virtual Joint Industry Forum (JIF) provided many examples from a range of industry and academic leaders, along with insightful discussions about what the industry faces in the near and longer terms.

At the 2020 JIF in New York City, it was clear from our various panels that the industry had a full plate of priorities for the year ahead. Then came COVID-19, and a whole new set of public health and economic concerns was added to the existing exposure mix. The virus brought a strong economy nearly to a halt; while officials assessed and responded to these threats, civil unrest on a scale not seen since the 1990s broke out on the streets of many cities; historic and near-historic weather and wildfire activity descended on communities whose resources were already strained by the pandemic.

And all of the above took place amid the uncertainty created by the most contentious, chaotic election year in modern U.S. history.

Through it all, as this year’s JIF speakers described, the property/casualty insurance industry managed to shine.

“Look at how our companies performed” in the real-time shift to fully remote work, noted Chuck Chamness, President and CEO of the National Association of Mutual Insurance Companies (NAMIC). “Then look at the dynamic changes in our businesses caused in large part by the pandemic, where we gave back $14 billion in premiums to policyholders and contributed a couple of hundred million dollars-plus in charitable contributions. We really did our job this year.”

David Sampson, American Property Casualty Insurance Association (APCIA) President and CEO, added that the “bulk of the industry came together to proactively work with agents and policymakers to create a solution that could work for all stakeholders to provide protection against widespread economic shutdown as a result of a viral outbreak.”

APCIA, NAMIC, and Independent Insurance Agents and Brokers of America proposed to Congress a Business Continuity Protection Plan (BCPP) that would allow businesses to buy revenue-replacement coverage for up to 80 percent of payroll and other expenses in the event of a pandemic through state-regulated insurance entities, with aid coming from the Federal Emergency Management Agency (FEMA), which would run the program.

Our industry also faced a literal existential threat in the form of efforts to require insurers to pay billions in business income (interruption) claims for which not one penny of premium had ever been paid. Thanks to industry leaders stepping up to educate policymakers and the media, much of this threat – though, by no means all of it – seems to have faded. Triple-I’s Future of American Insurance & Reinsurance (FAIR) campaign played a critical role in informing policy discussions on business interruption coverage, the uninsurability of pandemic risk, and the need for federal involvement to mitigate the financial impact of future pandemics.

Throughout this year’s virtual JIF, the emphasis on innovation is a consistent thread. Peter Miller, President and CEO of The Institutes, observed that the pandemic and its attendant operational and economic stresses forced the industry into innovation overdrive. He cited a member of The Institutes’ board saying 2020 “caused them to do 10 years of innovation in one,” adding that board members have told him work-from-home alone has saved their companies “one hundred-plus million dollars a year.”

Whether discussing the industry’s response to climate change and extreme weather or how to communicate the importance of risk-based pricing to policymakers, innovation is at the heart of solving every challenge (and seizing every opportunity) our industry faces. Peter emphasized the importance of using innovation strategically across the entire value chain – not just to solve specific problems as they emerge.

In addition to the panelists I mentioned above, the conversations featured a cross section of industry leaders, Triple-I subject-matter experts and non-resident scholars. If you weren’t able to attend, you can view and watch the panels here.

What Is Social Inflation? What Can Insurers
Do About It?

A recent study by the Geneva Association on the topic of “social inflation” addresses the challenges of defining and quantifying the phenomenon. More important, it takes on the question of what insurers and reinsurers can actually do about it.

“Social inflation is a term that is widely cited in insurance debates but it is often ill-defined or at best only loosely explained,” the report begins. Broadly speaking, it “refers to all ways in which insurers’ claims costs rise over and above general economic inflation.”

Actuaries typically label such growth in claims costs “superimposed inflation,” the study says, but their measures “may not adequately account for advances in medical technology, which create new therapies, change the costs of treatment, and increase the lifespan of seriously injured claimants,” as well as other considerations.

More narrowly, the report says, “social inflation refers to legislative and litigation developments which impact insurers’ legal liabilities and claims costs.”

The definitional difficulties are well illustrated in the rendering below, from the study.

Understanding what drives these costs – and whether they are temporary phenomena or a long-term trend – is essential to adequately pricing insurers’ exposures and enabling them to pay claims.

Major drivers, possible solutions

Rollbacks in tort reforms stemming from past insurance availability and affordable crises have been implicated by some for driving social inflation. The report finds that any such correlations are “weak at best.”

More significant, the study found, are shifting judge and jury attitudes in ways favorable to plaintiffs; growing anti-corporate bias; and aggressive tactics used by plaintiff attorneys, including third-party litigation funding.  

What can insurers do to battle social inflation? The report suggests four areas of focus:

  • Engage in the public-policy debate to promote legislative changes that further level the playing field between plaintiffs and defendants;
  • Get better at defending against aggressive and increasingly well-armed plaintiffs’ attorneys;
  • Upgrade underwriting to reduce opportunities for claims surprises. “Insurers need better early-warning systems,” the report says, drawing on information from across their organizations, their own and competitor liability cases, and data from social and digital media;
  • Develop products with an eye toward mitigating social inflation. Given the scale of potential liability exposures, the report says, “co-participation arrangements” to share risks among reinsurers could help maintain and even expand the boundaries of insurability. Parametric insurance also might have a role to play.

More on social inflation, from the Triple-I Blog

LITIGATION FUNDING RISES AS COMMON-LAW BANS ARE ERODED BY COURTS

SOCIAL INFLATION AND COVID-19

LAWYERS’ GROUP APPROVES BEST PRACTICES TO GUIDE LITIGATION FUNDING

IRC STUDY: SOCIAL INFLATION IS REAL, AND IT HURTS CONSUMERS, BUSINESSES

FLORIDA’S AOB CRISIS: A SOCIAL-INFLATION MICROCOSM

House Panel Discusses Approaches to Manage Future Pandemic Risk

That the insurance industry alone can’t be expected to cover future pandemic risk seemed to be a given at yesterday’s hearings by the House Finance Subcommittee on Housing, Community Development, and Insurance.

But, as is so often the case, the devil is in the details.

The session – Insuring Against a Pandemic: Challenges and Solutions for Policyholders and Insurers – was chaired by Rep. William Lacy Clay. In his opening statement, Clay said, “It is not realistic or practical to expect the insurance industry to shoulder the astronomical cost of a global pandemic. The American Property and Casualty Insurance Association has estimated that paying all [COVID-19-related] claims, regardless of exclusions, would amount to $1 trillion per month.”

With respect to business interruption coverage claims currently being adjudicated, Clay referenced both the virus exclusions in most commercial property policies and the lack of “direct physical damage or loss” in COVID-19-related cases.

John Doyle, president and CEO of global insurance broker Marsh, testified on the importance of a public-private partnership to address pandemic risk, as well as to the need to “act now” on a solution for future pandemics.

“Acting now on a public-private pandemic risk solution will accelerate the economic recovery by reducing uncertainty,” Doyle said. “Moving forward, capital markets will seek assurances that companies have protection against prospective pandemic risk. The pace of recovery will depend upon the nature and degree of confidence in the marketplace.”

Doyle said the credit and power of the U.S. government is essential – “at the same time, I believe the insurance industry has a role to play.”

The Pandemic Risk Insurance Act (PRIA), introduced by Rep. Carolyn B. Maloney of New York, provided the jumping-off point for the testimonies and discussions of alternative proposals. PRIA, patterned after the Terrorism Risk Insurance Act (TRIA) put in place after the 9/11 terrorist attacks, was generally recognized as a good start – but several other structures were proposed to address perceived weaknesses.

One is the Business Continuity Protection Program (BCCP), advanced by the National Association of Mutual Insurance Companies (NAMIC), the American Property Casualty Insurance Association (APCIA) and the Independent Insurance Agents & Brokers of America (Big “I”).

Brian Kuhlmann, chief corporate counsel for Shelter Insurance, speaking on behalf of NAMIC and APCIA, described BCCP as a program that “would provide straightforward revenue replacement for businesses and nonprofits of all sizes” using a parametric approach that wouldn’t require claims adjustment. Unlike traditional insurance, which pays for damage if it occurs, parametric insurance automatically pays when specific conditions are met – regardless of damage incurred.

Michelle Melendez McLaughlin, chief underwriting officer for the small commercial and middle market at Chubb, presented a “bifurcated” framework that would treat small businesses differently from mid-size to large corporations.

“Pandemics affect small and large businesses differently,” she said. The Chubb framework would cover small companies for up to three months of payroll and other expenses. Policyholders would be paid a pre-determined amount when the policy is triggered. “This provides policyholders with certainty that they will receive timely financial assistance after an event.”

For businesses with more than 500 employees, the Chubb proposal would create Pan Re – a federal reinsurance facility. “Private insurance companies that choose to sell coverage would write pandemic policies at market terms and retain some portion of the risk. The rest of the risk would be reinsured through Pan Re.”

R.J. Lehmann, senior fellow at the International Center for Law and Economics, agreed with other witnesses that the insurance industry isn’t equipped to handle pandemic risk alone. He went further to question whether insurance is the best structure for addressing this problem.

“Insurance is a system of risk transfer, not a system of economic relief,” Lehmann testified. “Even if private insurers could provide this coverage—on their own or with government support—it is not clear their incentives would align with public health goals or with the aims members of Congress likely have in mind.”

The best argument for a public-private partnership, he said, is that insurers can help policyholders mitigate risks. “But it’s important to ask, ‘Mitigate the risk of what’? The risk you’re trying to reduce is the risk that a business will shut down. But, in a pandemic, you want businesses to shut down. We want them to have a safety net so they can shut down and survive.”

Hartmann counseled legislators to take their time and get the solution right, drawing from all the options that exist.

“Let’s be humble about how little we know, even about the current pandemic,” he said. “Get help to the businesses, workers, and communities who need it now. Don’t legislate for the next pandemic while we’re in the midst of the current one.”

COVID-19 & Beyond: Study Highlights Claims Trends

Coronavirus

Commercial insurance loss estimates related to the COVID-19 pandemic vary widely, with Lloyd’s estimating global claims as high as $107 billion in 2020 and analysts from investment bank Berenberg projecting total claims between $50 billion and $70 billion.

But a new Allianz paper says the unprecedented size of pandemic-related claims is only part of the story. The paper discusses the changes in loss patterns and causes spurred by the pandemic that “may be the prologue to more far-reaching and disruptive changes in years to come.”

Shifting exposures

The pandemic has reduced risk in some areas while heightening it in others. The paper points to “material reductions [in claims] in some lines of property and liability insurance, most notably in the aviation sector.”

Reliance on technology and the shift to homeworking for staff and remote monitoring of industrial facilities make companies more vulnerable to cyber-attacks. Reduced air travel and increased emphasis on hygiene standards could benefit the risk profile of many industries, while changes in production line processes to facilitate social distancing could increase error rates.

According to Allianz, the cost of business interruption not related to COVID-19 fell in many cases as many manufacturers, their customers, and their suppliers either shut down or scaled back operations. On the other hand, COVID-19 containment measures have led to longer disruptions and more costly claims in some cases.

“For example, a fire at a chemical plant in South Korea forced the closure of the facility,” Allianz reports. “Restricted access due to the coronavirus lockdown prolonged the reinstatement period, increasing the overall cost of the standstill.”

The hibernation of some industries, such as aviation, doesn’t mean all loss exposures have equally disappeared, Allianz says. They’ve just changed, creating new risk accumulations: “For example, large parts of the worldwide fleet are grounded in airports, many of which might be exposed to hurricanes, tornados, or hailstorms. The risk of shunting or ground incidents, when large aircraft fleets are parked temporarily, also increases and can result in costly claims.”

Business resumption brings its own risks. Opening factories and restarting production lines are high-stress situations that can involve machinery breakdowns and fires.

Eye on supply chains

Allianz points to “the current rethinking and de-risking of global supply chains to achieve more operational resilience” as a trend to watch.

“Many companies are reviewing their supply chain strategies and evaluating options such as parallel supply chains with more redundancies or some reshoring from low-cost countries back to more developed markets,” Allianz says. “This will have an important impact for insurers, both in terms of generating demand for new protection solutions, as well as new claims scenarios.”

Potential also exists for claims to materialize from long-tail lines, such as directors and officers (D&O) or professional liability, as well as workers’ compensation, if any negligence or failures to adequately protect against the coronavirus outbreak have been perceived.

Ransomware claims rise in severity since start of pandemic

During the last week in September, Universal Health Services Inc., one of the largest hospital chains in the United States, began taking some ambulances out of service because of disruptions caused by a ransomware attack. Universal said no patients were harmed, but systems that support medical records, laboratories and pharmacies were taken offline at approximately 250 facilities.

This incident is part of a disturbing trend of healthcare institutions being targeted by ransomware attacks  as the software used by hackers becomes more sophisticated and their attacks broader.

While cyber insurance claims impacted businesses of all types and sizes certain industries, including consumer businesses (retail, hospitality and food), healthcare and financial services were more frequent targets of cyberattacks in the first half of 2020, according to a recent report by Coalition, a provider of cyber insurance.

Overall, ransomware (41 percent), funds transfer loss (27 percent), and business email compromise incidents (19 percent) were the most frequent types of loss—accounting for 87 percent of reported incidents and 84 percent of claims paid in the first half of 2020.

“We’ve seen a sharp increase in ransom demands over the past quarter as threat actors have exploited COVID-19 and changes in company operating procedures. Although the frequency of ransomware claims has decreased by 18 percent from 2019 into the first half of 2020, we’ve observed a dramatic increase in the severity of these attacks,” said the Coalition report.

Since email is the single most targeted point of entry for a hacker, taking a few basic email security measures and implementing an anti-phishing solution would go a long way toward securing your business from criminals.

Coalition reports that, for each claim processed, cyber insurance played a critical role in helping the insured recover operationally. For example, a nonprofit organization providing child and family services grants to other nonprofits was duped into transferring $1.3 million to criminals. Coalition worked with law enforcement and the financial institutions involved to recover the stolen funds.

U.K. Business Interruption Litigation Seems Unlikely to Affect U.S. Insurers

The Financial Conduct Authority (FCA), which regulates insurers in the United Kingdom, has indicated that it doesn’t believe COVID-19-related losses trigger most business insurance policies because such policies typically require a direct connection between financial loss and physical damage to the insured property.

Think fire, flood, wind, or earthquake damage.

The FCA is now litigating a test case involving policies of eight insurers that don’t require property damage to trigger coverage (Hear a three-minute explainer from the Centers for Better Insurance).

Is this case relevant to U.S. property/casualty insurers? It depends on whom you ask.

The FCA is looking at 17 policy wordings from the eight insurers and asking whether COVID-19 triggers a payout. Based on other policies the regulator has studied, the Financial Times reports, the court’s ruling are “expected to apply to nearly 50 insurers, who sold coverage to 370,000 customers.”

Senior executives from specialist insurance and reinsurance underwriter Hiscox Group warned that the FCA’s eventual findings could drive additional COVID-19 losses to its reinsurance book, Artemis reports.

Tom Baker – an expert in insurance law and policy at the University of Pennsylvania – called the U.K. case a “one-way ratchet” for U.S. insurers.

“If the carriers lose or end up having a lot of coverage, that’s going to be bad for them here” in the United States,  Baker said. “I think if the carriers win, the insurance policies [in the U.K.] are really different. They tend to be named-peril, rather than all-risks policies. I think it will be easy to distinguish them.”

Jason Schupp, founder and managing member of Centers for Better Insurance, disagrees that an adverse ruling for U.K. insurers will have much of an effect on their U.S. counterparts.  

“In Europe, [FCA] authorization to provide miscellaneous financial loss insurance allows an insurance company to write business interruption insurance that does not require evidence of property damage” to pay a claim, Schupp says. Even though the United Kingdom is no longer part of the European Union, Schupp says, “U.K. law itself recognizes the miscellaneous financial loss class of insurance.”

What does this mean for pandemic business interruption coverage in the United States? Not much, according to Schupp.

“The outcome of the U.K. litigation is unlikely to be relevant to the dozens – or perhaps hundreds – of business interruption lawsuits making their way through U.S. courts, where the property damage question is front and center,” Schupp says.

He goes on to say that proposals coming out of Europe or the U.K. for pandemic insurance going forward – such as a Lloyd’s framework – contemplate non-property-damage business interruption insurance solutions…. These proposals do not appear compatible with the current U.S. insurance regulatory system.”

A ruling by the FCA is expected in mid-September. Last week, the regulatory body said that, while the case doesn’t address how any resulting claims payments would be calculated, “We may intervene and take further actions where firms do not appear to be meeting our expectations and treating their customers fairly.”

Electric vehicle sharing programs: What to know before you ride

The proliferation of electric ride-sharing services throughout the U.S. is fueled by demand for affordable and green transportation options. Vehicles ranging from e-scooters, electric bicycles and mopeds are easily accessible via apps.

But regulators have to  balance the popularity of the sharing programs with public safety, as injuries and even a few fatalities have occurred.

Riders also need to be aware of the insurance issues surrounding these programs.

A ride-share company’s insurance policy might not cover a user in the event of an accident. Many companies require users to assume all liability arising out of their vehicle’s use.

That means if you’re driving a one of these vehicles and get in an accident:

  • You may have to pay out of your own pocket to repair property damage.
  • You may have to pay your own medical bills if you’re injured. You may also be able to use your health insurance.
  • If you injure a pedestrian, you could be held liable for their injuries.
  • If you damage another person’s vehicle or other property, you could be held liable for repairs.
  • That’s why it’s important to read the company’s user agreement, so you know your responsibility as a rider.

As for your own insurance, whether you’re covered depends on the specifics of your policies. You should speak to your insurer or agent. Expert opinion and wording are critical.

Medical costs to treat injuries sustained while operating an e-scooter or moped are addressed under the injured person’s health insurance. If the person was injured while using the vehicle for work-related purposes, the person could be eligible for workers compensation benefits.

Whether a user’s personal insurance would cover any third-party liability arising out of an accident they caused or contributed to varies by policy.

Homeowners: A standard homeowners policy will typically not cover liabilities arising out of the use of a motor vehicle, usually defined as any self-propelled vehicle. Homeowners policies also exclude any liability arising out of a motor vehicle rented to an insured. Renters insurance also will not cover vehicle-related liability.

Personal auto: The coverage on a personal car insurance policy generally does not extend to a rented electric vehicle. That means if you’re involved in an accident while driving such a vehicle, your car insurance policy will probably not pay for medical bills or property repairs (yours or another person’s). Similarly, if you have an insurance policy for your own moped, it likely will not cover you when you rent one.

Personal liability umbrella: Personal liability umbrella policies (PLUP) offer an extra layer of protection when an insured exhausts the limits of their underlying homeowners or auto policy. Such policies can also provide coverage for perils that are excluded from the underlying insurance policies. For example, unlike an auto policy, a standard PLUP doesn’t usually exclude vehicles with fewer than four wheels and therefore may provide some coverage for electric vehicle liabilities.

The bottom line is: check with your insurer or agent about your coverage.