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Reinsurance: COVID-19 – where are we now?

15 October 2020

At different stages in the COVID-19 pandemic, we have considered the impact on the reinsurance market. Most recently (see our Law-Now), we considered the likely implications of the “second wave”, a concern which has sadly moved from the realms of speculation to reality. The impact on the upcoming renewal season is likely to be significant, but fraught with uncertainty. In the UK Property market, the first instance decision of the FCA’s test case on Business Interruption brought a degree of clarity, but uncertainty over appeals has led to inconsistency amongst cedants in their approach to notification of claims to reinsurers. Exposures Whilst many insurers and reinsurers scramble to impose pandemic exclusions for 1 January 2021 renewals, there nevertheless remain significant areas of cover that could still be impacted by the ongoing pandemic and increasingly stricter government restrictions seeking to suppress the resurgence of the virus. In the event cancellation market, further events are now being cancelled for Q4 2020 and Q1 and Q2 2021. For many of these events, cover was put in place before the March 2020 surge of COVID-19 in Europe and North America, and before COVID-19 exclusions became widespread. Some of those policies are multi-year covers including events due to take place in 2021 as well as 2020. This could leave some direct carriers with ‘losses occurring during’ excess of loss protections – likely to include COVID-19 exclusions from the 1 January 2021 renewal – unreinsured. Meanwhile, direct carriers face ongoing exposure to BI losses on policies remaining in force through Q4 2020 ...

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