The current COVID-19 pandemic creates an opportunity for captive owners to evaluate existing policies within their captive, according to Anne Marie Towle, global captive solutions leader at Hylant.
Towle suggested that one immediate question is the captive providing some business interruption insurance or event cancellation policy.
Business interruption losses related to the coronavirus “may be recoverable in limited circumstances”, but Towle said: “It is a complex process which requires planning, along with specialised insurance and forensic accounting expertise.”
“Specific circumstances and policy wording are critical to determining if, and to what extent, losses resulting from the coronavirus are included, and quantifiable, under a business interruption or event cancellation policy”, she added.
Towle explained that business interruption policies are intended to protect a business against the loss of income related to disasters and other emergencies and most commonly triggered when “direct physical loss of or damage to” insured property occurs during natural disasters, such as hurricanes or earthquakes.
Similarly, she noted that contingent business interruption coverage can apply to losses associated with other events, such as disruptions to the business’s customers or suppliers.
Towle highlighted that Hylant is “working diligently with captive owners to determine the ability to make a claim on their business interruption or event cancellation policies and providing the benefit of cash flow from the captive”.
She highlighted: “This is an excellent opportunity for captive owners to utilise the captive balance sheet as intended. I anticipate expanded utilisation of captives in the future to capture the difference in conditions and exclusions in the traditional market for business and event cancellation policies particularly for pandemic risks.”
