As organizations navigate through a pandemic, the material change to their operations and risk profile could entitle them to certain cost saving opportunities. The following are examples of potential ways to achieve savings across your business.
Businesses that face changes in revenue may qualify for return premiums on their insurance. This is particularly apparent with Business Interruption insurances. Marsh Forensic Accounting team can assist our clients in declared values reviews to reassess these values in light of the changing revenue forecasts. This will likely result in a premium return of some amount back to our clients, who can unlock some cash flow to the business.
Claim BI Insured Losses
There is an opportunity to obtain immediate cash flow savings through either:
- Closing out and settling outstanding claims; or
- Identifying any recent losses from forced closures and then preparing the claim. The Marsh Claims Practice can help quantify the losses and then advocate on a client’s behalf to maximize recoveries and expedite settlement.
The management of large losses following a disruptive event or dispute can be extremely complex. Marsh Claims Practice can provide comprehensive support to guide you through the key aspects of post event management. This support can include:
- Loss quantification and claim preparation — swift assistance to help secure cash flow, assist mitigation strategies, quantify losses, as well as present and settle insurance claims.
- Claims project management and claims engineering — assistance with the claims process to enable you to concentrate on ongoing business matters while helping you to maximize a fair and reasonable recovery.
- Fidelity and liability claims support — assistance with preserving and recovering evidence and interviewing employees to measure economic damages, helping to increase the likelihood of a full insurance recovery while minimizing investigative costs.
- Dispute advisory — assistance with dispute resolution, expert witness testimony, and litigation support throughout the dispute resolution process to help you resolve issues in an expeditious and cost-effective manner.
- Uninsured loss recovery — assistance in pursuit of recovery rights against responsible third parties for uninsured property, financial and marine claims.
Post-pandemic, the financial value and cost to reinstate buildings is likely to change. This can make a material impact to financial reporting valuations and sums insured. The result of this is companies can be over-insured and paying too much insurance premium or incorrectly stating the value of their buildings in financial reports. The Marsh Valuations team can conduct these valuations and provide the accurate financial reporting and insurance valuation.
Prior to the start of the pandemic, we saw a global rise in interest and implementation of captives, driven primarily by the transitioning insurance market. Organizations established captives for traditional lines, but also increased utilization in lines of business that have been most impacted by events like COVID-19, such as business interruption, surety, supply chain, trade credit, and medical stop-loss. The Marsh Captive Solutions team can provide our clients with insight on captive utilization, share practical captive techniques to deploy immediately to support your organization. We can also discuss how pandemic coverage is currently written, and cover ways in which captives can play a key role in the development of pandemic insurance coverage by helping to alleviate capacity constraints as the market evolves. In addition, we can conduct captive feasibility studies needed for organizations looking to set up a captive. Further, we can conduct strategic reviews for organizations that wish to gain more optimal operation and advantages from their existing captive.
As businesses look to adjust their insurance programs to take into account either market forced issues (deductibles, coverage or limit) or from RFO reviews, captive insurance structures can provide further financial and strategic benefits.
Beyond financial elements, there are additional insurance benefits available:
- Coverage for Risks Not Usually Insurable A captive, answerable only to its parent, can provide insurance cover that is not available in the commercial market, or not available at a realistic premium. This could well be some or all of pandemic type risks depending on the market response.
- Reduced Need for Commercial Insurance and Improved Negotiating Position As a captive matures and its net worth grows, it becomes capable of retaining a greater proportion of its parent’s risks. The increased use of a captive diminishes the parent’s dependence on commercial insurance.
- Flexibility in Program Design A captive provides opportunities to more easily structure insurance programs since the captive is not subject to the same constraints and conventions normally evident with traditional insurers.
- Broader and Simpler Insurance Contracts A captive is usually domiciled where there is little, if any, regulation concerning policy wording, thereby allowing specifically tailored insurance and reinsurance contracts.
- Better Risk Management Program A captive facilitates the design of allocation systems to distribute costs more equitably among profit centres, the implementation of uniform accounting procedures, the accumulation of actuarial information, the design of more effective claims-handling, loss-control and engineering programs, and the unification of the application of risk management throughout all divisions or subsidiaries.
For corporate clients that are considered financially strong, the Marsh’s Surety Practice may be able to help you to free-up guarantee limits enhancing thereby your debt issuance/working capital capabilities under multi-product bank facilities.
This is achieved by either replacing or backing existing bank guarantees / SBLCs utilizing risk capacity delivered by the largest specialist insurance market specialized in guarantee-related solutions, the Surety Market.
Bonds offered by surety insurers can be worded and used in a similar way as bank instruments to comply with contractual/regulatory requirements or beneficiary’s preference. Alternatively, we are able to structure solutions to back existing guarantee instruments issued by banks in order to achieve the intended limit relief for our corporate clients.
Among other obligations, surety bonds can be used to guarantee traditional project-related obligations as well as collateral tied to insurance programs, self-insured worker’s compensation obligations, lease agreements, environmental or other similar types of obligations.
The Marsh Surety Practice provides a complete solution for your guarantee needs, from arranging guarantee facilities and securing adequate capacity to providing advice on bond wordings and indemnity negotiation. We bring together the scale, scope, and intellectual capital of Marsh to deliver innovative solutions, domestically and globally.
Reduce Insurance Premiums
With competing cash flow pressures, it is important to re-evaluate if your business can take on more risk and therefore reduce insurance premiums. The first part of this is to:
- Work with your broker to identify what is the business’ risk bearing capacity, i.e how much financial impact can a company withstand without significantly impacting its operations; and
- Understand what business’ strategic appetite is to take on more risk. Marsh Risk Analytics can model the losses that the business is exposed to and then conduct Risk Finance Optimization (RFO). A RFO mathematically determines what are the company’s ideal deductibles and limits that will result in the most cost effective outcome.
Workers Compensation Adjustments Management
The impact of COVID-19 on many Asian businesses should not be under-estimated with some businesses having to completely review their operating environment. Where you have had to make material business changes resulting in a change to your predominant business activity or reduced employee numbers, our team are here to support you.
The Marsh Casualty Practice will work with your workers’ compensation insurance provider to review your particular circumstances and look at options around mid-term adjustments to increase your cash flow when you need it.
We are here for you
As COVID-19 continues to affect how we all do business and interact with one another, we are committed to continue to deliver timely and relevant information to our clients and broader community. If you have any questions or would like to have a conversation about the impact coronavirus is having on your business, please reach out to your Marsh representative, or email us here.
The information contained in this page provides only a general overview of subjects covered, is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Insureds should consult their insurance and legal advisors regarding specific coverage issues. All insurance coverage is subject to the terms, conditions, and exclusions of the applicable individual policies. Marsh cannot provide any assurance that insurance can be obtained for any particular client or for any particular risk. Statements concerning tax, accounting, and legal matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and should not be relied upon as tax, accounting, or legal advice, which we are not authorized to provide. All such matters should be reviewed with your own qualified tax, accounting, and legal advisors.