Though still in the thick of dealing with insurance claims for policyholders against their insurers for COVID-19 business interruption losses, we are starting to see instructions concerning the emergence of disputes in the global reinsurance market. COVID-19 is set to erode a significant portion of the reinsurance market's reserves, which would otherwise have been available for unrelated major catastrophe losses. For insurers and reinsurers, aggregation issues will be contentious. The meaning of event, occurrence and cause will be central to these disputes and, allocation of losses to different years of account will only add to the complexity of these claims.
As always, reinsurers will question the extent to which they must follow the fortune/settlements of their reinsureds, especially where there may be an incompatibility between the reinsurance and the underlying insurance wording; or where in certain jurisdictions, insurers may be forced to pay out for claims which reinsurers say are 'non-covered' claims. Although the English Supreme Court's judgment was handed down just less than two months ago, the next round of COVID-19 related disputes is bubbling, but this time it involves the global reinsurance market.
Reinsurers will be assessing whether their wordings really cover COVID-19 losses at all; and whether COVID-19 can properly be described as a major catastrophe loss? Rather ironically for insurers, the boot is now firmly on the other foot while they wait to see whether they can recover major losses from their own reinsurers…
If you have any questions or would like to discuss what this means for you and your business, please contact a member of our Insurance Disputes team.