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Insurer CEOs optimistic business interruption wordings will hold

Hartford Chairman-CEO Chris Swift

U.S. insurer CEOs expressed optimism Thursday that business interruption policy wordings on commercial property insurance policies related to the coronavirus pandemic will hold.

The comments came from panelists during S&P Global Inc.’s 2020 Virtual Insurance Conference.

Despite efforts by the plaintiffs’ bar to try to venue-shop and to find the “soft spot” on this issue, “the policy wordings will hold,” said Rob Berkley, president and CEO of W.R. Berkley Corp. based in Greenwich, Connecticut, during the webinar.

“There is no doubt there are countless examples of where there is coverage that is provided, and that insurance should perform,” Mr. Berkley said.

But the plaintiffs’ bar is choosing to use a “broad brush” and is “disregarding realities that stem from virus exclusions, as well as other wordings that would suggest that physical damage is required to trigger business interruption,” Mr. Berkley said.

Chris Swift, chairman and CEO of the Hartford Financial Services Group Inc., said the insurer has its own policy forms and exclusions.

“From our particular perspective we think our wording is abundantly clear. Specifically, when there is coverage added back for viruses it’s in conjunction with remediating property damage caused by a covered peril,” Mr. Swift said.

Early court rulings on the issue have been “generally pleasing,” Mr. Swift said.

Dozens of businesses have sued their insurers over the past two months seeking coverage for coronavirus-related business interruption losses.

Many policy form templates used in the U.S. are very different from those used in other markets around the world, Mr. Berkley said.

“While there are plenty of exceptions, by and large the forms that are widely used in the U.S. will address the issue appropriately and consistently to this issue,” he said.

Many small and mid-sized businesses have had tremendous revenue disruptions to their business, Mr. Swift said. “That’s why we’ve been trying to accommodate new billing practices,” he said.

The Hartford has processed around 150,000 endorsements either digitally or over the phone to its small and mid-sized business customers, Mr. Swift said.

“We’re trying to be responsive with a little forbearance on billing as long as we eventually get paid,” he said.

Commercial insurance rates will continue to increase, and terms and conditions will be scrutinized heavily going forward, panelists said.

Drivers of rate increases such as the low interest rate environment, social inflation and returning discipline to reinsurance markets are “alive and well,” and will continue to “push rates up for the foreseeable future,” Mr. Berkley said.

However, COVID-19 may prove to be an “inflection point” for the workers compensation line of business, he said.

After several years of rates eroding, “it’s possible people are going to take a pause and think about exposures and loss costs,” and consider “does that make sense going forward or do we need to see a reversal of rate trends and start to move back up,” Mr. Berkley said.

Terms and conditions in the overall commercial market have firmed, Mr. Swift said.

The potential for an elevated hurricane season is an “added component to an already stressed environment,” he said.