Lloyd’s offers policy extensions in case of building closure

The Lloyd’s Market Association on Thursday issued policy language that would temporarily extend coverage for existing policyholders if the market is forced to close due to the coronavirus pandemic.

The clause would extend coverage for Lloyd’s of London insurance policyholders and reinsurance cedents for 14 days beyond the expiration of policies, the LMA said in a statement.

The policy language is intended to make sure the policyholders and cedents “will not be left without cover if the developing COVID-19 situation makes normal renewal discussions untenable,” the LMA said.

The LMA is comprised of all underwriting business at Lloyd’s but its wordings are for guidance and are not binding.

The clause, known as LMA5392, ensures continuity of coverage for Lloyd’s policyholders “in the unlikely event that, for more than one day during the seven business days prior to a scheduled renewal, access to Lloyd’s is prohibited and the Lloyd’s emergency trading protocol fails,” the statement said.

For the extension to apply, access to the Lloyd’s building must be prevented by either the Corporation of Lloyd’s or follow the “imposition of a quarantine or restriction in movement of people by any national or international body or agency,” according to the clause.

The automatic extension will only apply if policyholders, cedents and their brokers “despite using best endeavors, are unable to implement Lloyd’s emergency trading protocol,” the clause states.

The extension applies only once unless otherwise agreed in writing, will not “increase or reinstate any applicable limit(s) of liability,” and “can be voided by mutual agreement,” according to the language.

“Although the situation specified is extremely unlikely to occur, the LMA and its members felt it prudent to draft this model clause to ensure that Lloyd’s customers are not left without coverage should the coronavirus, or any other event, prevent renewal negotiations from taking place,” Patrick Davison, deputy director of underwriting at the LMA said in the statement.

The Lloyd’s market will shut its trading floors Friday in a test of emergency protocols related to the coronavirus, Chief Executive John Neal said earlier on Thursday.

More insurance and risk management news on the coronavirus crisis here.