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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance explores the challenges presented by today's business and economic upheaval, as well as the hardening insurance market, and what it means for the captive insurance industry.

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Analysis Says COVID-19 BI Losses Dwarf Insurance Industry Premiums

Sorry Closed for COVID-19 sign on standing sign on sidewalk
April 30, 2020

An updated analysis suggests that monthly COVID-19-related business interruption (BI) losses for US businesses with fewer than 500 employees could range as high as $668 billion per month.

Those numbers dwarf the premiums for all relevant commercial property risks in the key insurance lines, which are estimated at $4.5 billion per month, according to the American Property Casualty Insurance Association (APCIA), the source of the updated analysis.

"Business interruption insurance policies do not typically cover losses related to viruses. Only the federal government can be the bridge for a crisis of this proportion," David A. Sampson, president and CEO of the APCIA, said in a statement.

The APCIA's updated analysis estimated BI losses for businesses with fewer than 100 employees at between $255 billion and $431 billion per month. For businesses with fewer than 500 employees, the monthly estimate was $393 billion to $668 billion.

The statement noted that surplus for all US home, auto, and business insurers combined is roughly $800 billion.

In the statement, Mr. Sampson cites the insurance industry's support for federal assistance delivering aid directly to affected businesses, including the industry's participation in a coalition calling for the COVID-19 Business and Employee Continuity and Recovery Fund, which would provide financial assistance to impaired businesses.

Mr. Sampson also cited insurers' call for the development of standards that will help businesses reopen safely and with reduced risk.

"Insurers are also encouraging policymakers to develop COVID-19 safety and liability protection standards that will help business owners manage the uncertainty of when and how to reopen," he said. "Threats of lawsuit abuse exploiting this crisis with litigation profiteering will stop America's recovery before it even starts."

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