Immediate and long-term implications as businesses adapt to the interruption and changes triggered by COVID-19 can result in increased or new liabilities and risks. Given an organization’s risk profile may look very different pre-pandemic versus post-pandemic, business management needs to take steps to ensure the organization’s risk profile continues to be up-to-date and well understood by decision-makers and key stakeholders.
Alternative Risk Transfer
Many businesses rely primarily on traditional risk solutions, including a variety of property, casualty, and financial and professional insurance coverage forms to protect their assets, operations, and people. However some clients can benefit from more complex and innovative solutions. Alternative risk transfer and nonstandard solutions have gone mainstream.
To meet these needs and capitalize on evolving market conditions, Marsh Alternative Risk Transfer Group represents a dedicated group of Marsh colleagues focusing on non-standard financial solutions that draw on a variety of capital sources. We work with risk buyers to use methods of self-insurance, captives, risk retention groups, alternative capital, and other solutions from insurers and reinsurers that are active in the non-standard solutions space.
We can also provide indemnity, parametric, and hybrid solutions that allow buyers to gain greater protection and flexibility within their insurance programs. We engage with state-of-the-art analytics and actuarial experts along with risk professionals from across all risk practices in both Marsh and Guy Carpenter to create and gain access to unique client offerings.
Business Continuity Plans
Pandemics can damage an organization’s business operations, financial performance, employee health and wellbeing, supply chains, stakeholder confidence, and can even drive a company out of business. Insurance programs, though they may be able to reduce financial impact, are not always enough to protect a company.
However, by focusing on pandemic business interruption risks and strategies designed to reduce and mitigate the impact of such potentially highly-disruptive risks, Marsh Risk Consulting (MRC) can help organizations improve you business resiliency and protect your brand. This can be done through:
- Supporting the identification of business critical activities and functions.
- Reviewing or developing Business Continuity Plans.
- Providing specific and detailed response guidance.
- Running scenario workshops to test and develop strategies to improve continuity.
- Training employees on how they can understand and execute the plan in the event of a pandemic (or another type of business interruption).
Business Interruption Scenario Workshops
There are multiple ways in which a pandemic can affect a business. Through a specific pandemic scenario workshop and assessments, we can help identify how a client’s business is exposed to future pandemics. In addition to reviewing and supporting plan updates, a workshop will simulate a real scenario and go through all key functions of the business and the business continuity plan (if available), to identify risks exposures and profile their severity. From this, the Forensic Accounting team can also do a 'Contingent Anticipated Business Interruption Loss" analysis to quantify the forecasted financial impact to the business. With this information, companies are in a better place to refine your business continuity plans, crisis management plans, supply chains, and identify appropriate risk transfer options.
FINPRO – Financial & Professional Liability Risk Identification
The COVID-19 pandemic will impact risk profiles across a number of exposures. The three most obvious financial and professional exposure changes include:
- Directors’ & Officers’ Liability - Given the volatility in the financial markets, we’re seeing huge drops in stock value and financial pressure that can potentially collapse businesses. The consequent implication is litigation alleging disclosure deficiencies, breaches of fiduciary duty and corporate mismanagement, which is likely to trigger D&O coverage. For businesses in the direct economic firing line of COVID-19, for example retail, hospitality, leisure, and travel we expect D&O insurers to increase underwriting scrutiny so it will be critical to engage with your broker as early and openly as possible.
- Cyber - More remote working means cyber security will likely be tested to a level never experienced before. As cyber criminals look to exploit weaknesses from this surge in remote connections, and systems and processes are pushed to the limit, increasing claims under cyber policies are likely.
- Crime - We have already seen a significant risk in Social Engineering and Fake Precedent Frauds, as people may be less likely to follow standard protocol and are more likely to affect fund transfers without the same level of cross checking - especially at these times of greater use of remote access.
Our team of financial and professional liability experts can help you understand how your exposures in this current environment are shifting and therefore, how to better align your risk management structure to optimize the balance of protection and cost.
Insurable Risk Identification and Gap Analysis
Once recovery commences from the pandemic, companies will likely have changed their operating model, suppliers, workforce, and future strategy. All of these changes have implications to a company’s risk and therefore their insurance program. Through an insurable risk identification exercise, these risks can be identified and then compared to the insurance program to identify any gaps, or duplications, in coverage. Following this, recommendations can be made on how the program, limits, and wordings can be restructured to cover the insurable risks in the most cost-effective way.
Insurance policies provide a financial safety net for certain types of adverse events. An Insurable Risk Review validates coverage and identifies potential program enhancements, to help ensure policies actually anticipate the range and quantum of insurable risks reflected by an organization’s exposures. Using a structured and disciplined methodology helps to close potential gaps, improve program efficiency, and instill confidence that insurance policies will respond as expected.
Marsh’s Insurable Risk Review methods are applicable to any organization, regardless of industry sector and complexity and is scalable to address all or specific lines of coverage.
Liability Risk Identification
With the outbreak of a pandemic, companies potentially have new liability exposures that they may not have previously anticipated, as well as reduced liability risks due to decreasing revenues and operational changes. Through a Liability Risk Identification workshop and assessments, the changing liability risks can be identified and profiled. An Insurance Gap Analysis can also be done to identify gaps in coverage or potential premium savings.
Some of the increased liabilities that may arise due to a pandemic include:
- Liability for employees and third parties who are exposed to the virus at work, on your premises, or from coming into contact with your employees.
- Management liability, for example, in how the senior management team prepares for, and responds to an outbreak.
- Directors’ & Officers’ Liability, for example, during or following a pandemic, shareholders may file litigation alleging, among other things, a lack of preparedness for the potential effects on corporate operations and revenues.
Pandemic Forecast Models
At the beginning of a pandemic, it can be very difficult for businesses to predict and quantify how they might be affected as the pandemic progresses. Pandemic forecast models can be used to predict the near-term trajectory of the pandemic. This predictive modelling framework consists of a stochastic metapopulational compartment model coupled with human mobility networks to forecast how the pandemic will spread. With this information, businesses can forecast how the pandemic will develop and affect operations, allowing you to make plans to improve business continuity, employee safety, and financial viability.
Pandemic Risk Vulnerability Assessment
Businesses have multiple exposures to pandemics, which can significantly affect their operations, employee wellbeing, supply chains, revenue, and future viability. A pandemic risk vulnerability assessment will identify the various ways the business is exposed to pandemics (outside of just business interruption) and will profile the severity of these risks. With this information, risk control and mitigation measures can be put into place and inform the business continuity and crisis management plans and make sure the business effectively responds to a pandemic.
Working from Home Cyber Threat Risk Management
As companies seek to reduce pandemic exposures to employees and encourage them to work from home, they become more susceptible to cyber risks.
Some of these risks include:
- Insufficient IT infrastructure capacity and expertise.
- Immature or non-existent data governance.
- Inadequate security strategy, architecture, and controls.
- Ineffective enforcement of remote work policies.
These risks increase the vulnerability to social engineering and phishing scams, denial of service (DoS) attacks, and ransomware attacks. Marsh Risk Consulting can conduct a Cyber Risk Focus workshop to identify these risks, profile their severity and work with your Compliance and IT teams for effective risk management and mitigation treatments.
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.