Expect silent pandemic risk in large insurance programs: Johansmeyer, PCS

Head of PCS, Tom Johansmeyer, tells Artemis that there’s a real sense across the marketplace that certain large, complex insurance towers are going to be affected by silent pandemic risk.

Johansmeyer spoke with us in a recent video interview, which you can view in full along with our other video content here.

Similar to silent cyber, silent pandemic risk is potentially embedded within numerous lines of insurance and reinsurance business, with validity of claims dependent on policy wordings and ambiguity.

As the current Covid-19 coronavirus pandemic spread across the world, businesses and entire industries of all shapes and sizes have been severely impacted and unsurprisingly, insurance and reinsurance firms are facing an uncertain but potentially vast level of claims and disruption from various avenues.

Business interruption is one class of business that has received a lot of attention during the current crisis, with legislative action targetting forced retroactive cover being met with disdain from the industry.

It’s been well documented that most standard BI policies exclude virus outbreaks and require a physical damage element for the policy to trigger, but a lack of specificity and ambiguous policy wording in some instances suggests some carriers might experience some unexpected BI losses from Covid-19.

“We’re seeing a similar risk (to silent cyber) potentially arising in the large property per risk market for pandemic. In the big programs, the big companies, big buyers where the underlying policies and program language may not go into enough specificity on pandemic, or be silent on the issue in general.

“We’ve actually heard from a few people that there are some hints in the large property per risk market that a couple of programs could be affected by the pandemic,” says Johansmeyer.

The 2017 NotPetya cyber event brought into focus the potential for huge silent exposures in property programs for insurers and reinsurers. The reason some large property programs were affected by the cyber event was because for huge, globally diverse companies it’s seeming easier to find the required physical damage to trigger the business interruption.

“The same issue appears to be in some of those manuscripts. Where you’ve got large, major international organisations that buy big insurance towers for property. They’ve got a lot of BI, or seemingly BI, right, and what they need to do is figure out whether or not they have property damage from Covid-19.

“If you’re a big enough company with complex enough operations, there is a greater risk it seems, that you’ll be able to find the physical damage trigger you need and there’s a sense across the market right now that a couple of these programs are going to be affected,” says Johansmeyer.

The video is embedded below. All of our video interviews can be viewed in full here.

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