As a result of the spike in claims from the COVID-19 pandemic, particularly those arising from medical insurance and business interruption insurance related coverage, captive insurers have turned their focus onto certain key areas of their business activities, according to Diane Bugeja, senior associate at Camilleri Preziosi.
Bugeja noted that the insurance sector is having to navigate unprecedented market conditions, with insurers and captive insurers likely to be faced with a plethora of claims resulting from the effects of the pandemic and the restrictions imposed in most countries with a view to containing the spread.
She said that solvency and capital risk have come under the spotlight, not just as a result of increasing claims but also “due to adverse movements in financial markets, which, in turn, warrants a revision of technical provisions on an ongoing basis”.
Equally important, Bugeja noted, is the consideration of business interruption risks at the level of the captive insurers themselves and the smooth implementation of contingency plans and business continuity plans, whilst still ensuring service continuity at the same level of quality.
An additional consideration relates to the contractual interpretation of coverage, according to Bugeja, particularly whether damages resulting from COVID-19 (or measures adopted in response thereto) fall within the definition of ‘force majeure’ and qualify as a basis for excluding coverage.
She explained: “As the captive industry continues to grapple with these key matters, European regulators, including the European Insurance and Occupational Pensions Authority and the Maltese domestic regulator, the Malta Financial Services Authority, have been in constant communication with the industry in order to facilitate their operations in these turbulent times (by, for example, flexing the deadlines of regulatory returns submissions), but also to ensure that the captive industry is indeed acknowledging these issues and addressing them in a timely and comprehensive manner.”
The COVID-19 outbreak is having significant consequences on the global economy. According to Coronavirus COVID-19 global cases by the Center for Systems Science and Engineering at Johns Hopkins University, as of 25 March at 8am, a total of 424,048 cases have been confirmed worldwide, with the largest numbers in China, Italy, the US and Spain.