The COVID-19 pandemic has shaken our nation and exposed a great chasm between the expectations of insureds and the insurance industry. The human and financial impact of the pandemic has only just started, and whilst there are glimmers of hope through a renewed sense of community and purpose, the true long-term impact of COVID-19 is largely unknown.
As Managers, we have seen at first hand the determination and resilience shown by the Boards of our managed Mutuals in considering how they can support the Members of their Mutuals.
The Mutual model adopted by Regis’ managed Mutuals has flexibility to be able to offer their Members help and support during this unusual and difficult time. These Boards, which are elected by the Members, have, where possible, returned contributions, offered pauses in cover and payment holidays, and have in addition, investigated added value products to support Members during this period. To highlight just one example, the Activities Industry Mutual agreed to offer Members a 3-month payment holiday for those who pay monthly.
However, in common with the wider insurance marketplace, some business interruption policies are unlikely to cover the effects of the Coronavirus shutdown. The lack of cover for pandemics like COVID-19 is not confined to the UK. It is affecting the global insurance markets. The global insurance market has made it clear that it is unlikely to be able to underwrite the scale of losses involved, some sources place at five times the insurer’s current capacity. Such a scale of loss requires a financial support package from central Government.
Every one of the Mutuals that we manage has cover wordings specific to the respective Mutual’s needs and it is therefore dangerous to try to generalise coverage issues here.
It is however clear that the almost blanket denial of cover for the effects of lockdown taken by the insurance industry has not been welcomed and in many instances has been challenged. It is inevitable that with such differing legal opinions the matter will have to be dealt with in the courts unless the Government steps in and mandates a particular interpretation.
Generally, a Regis managed Mutual provides protection for Members through a hybrid structure, whereby the Mutual’s discretionary layer responds to the first portion of a loss, with the balance transferred to the insurance market. This structure is designed to give each Mutual and its Members the certainty that that the Mutual can respond to Members’ valid claims, however intense the claims experience. Obviously these Mutuals would be unduly exposed financially were they to provide cover for the effects of the current situation outside of their cover wordings and therefore without being able to engage their supporting insurance programmes. Where there is some doubt or ambiguity in the wordings, the Mutuals have the same desire as everyone else to seek and obtain a definitive answer to these coverage issues.
Mutuals can act as a focal point for Members’ collective voices and are therefore often able to exert more leverage than perhaps any individual Member might be able to achieve on its own.
I believe that Mutuals, and the growing interest in risk retention, will be one of the good factors to emerge from this disaster. That is for tomorrow. Today it is critical for Mutual Members, working with the Boards and Regis as their managers, to use collective strength to achieve optimum results in the circumstances. We at Regis are committed to working to that end.