Author Topic: BRK and business interruption insurance  (Read 5221 times)

longlake95

  • Sr. Member
  • ****
  • Posts: 335
BRK and business interruption insurance
« on: April 09, 2020, 08:42:14 AM »
Anyone have thoughts on BRK's exposure to interruption insurance? I'm not sure about the clauses and exclusions that might be found in a typical BI policy.

From my reading over the years it doesn't seem to be a big part of BRK. I don't think WEB would like the kind of unpredictable exposure unless he was getting super-high premiums.
« Last Edit: April 09, 2020, 08:44:20 AM by longlake95 »


StubbleJumper

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1343
Re: BRK and business interruption insurance
« Reply #1 on: April 09, 2020, 08:44:01 AM »
This article discusses the question in general, but who knows what BRK might have chosen to insure:


https://www.insurancejournal.com/blogs/big-i-insights/2020/03/24/562253.htm



SJ

LC

  • Hero Member
  • *****
  • Posts: 4756
Re: BRK and business interruption insurance
« Reply #2 on: April 09, 2020, 09:04:02 AM »
Quote
In the business income policy, with or without the CP 01 40, there is no coverage – unless:

Courts ignore the meaning and reality of property damage;
Courts ignore the pollution exclusion (in the absence of the CP 01 40); or
Governmental authorities intervene.
Even if coverage is found – there is generally a 72-hour deductible. The virus doesn’t live in the air on surfaces beyond that amount of time.

Here is the final reality, is it the property or the people that is the problem? Is this a biological issue or a property damage issue? The commercial property policy is not designed to cover biological issues, it is for property issues.

To end this article, given the policy wording and requirements, there is no coverage for a business income loss resulting from the coronavirus.

Unsurprisingly, the guy paid by insurance companies and writing for an insurance journal claims that business insurance does not cover this event. No conflict of interest here, I suppose?
"Lethargy bordering on sloth remains the cornerstone of our investment style."
----------------------------------------------------------------------------------------
akam| brk.b | goog | irm | lyv | net | nlsn | pm | ssd | t | tfsl | v | wfc | xom

Pedro

  • Newbie
  • *
  • Posts: 12
Re: BRK and business interruption insurance
« Reply #3 on: April 09, 2020, 09:17:51 AM »
My experience is that direct (fire) and indirect (BI) losses caused by a virus will be excluded in insurer/commonly used commercial property insurance policies. I see insurer wordings being consistent in excluding this peril.

It's the non traditional wordings where ambiguity can arise. Those wordings are abundant in soft markets. It's impossible for the average investor to know because you can't access each individual wording to see the verbiage.

It will be interesting to see Q1 loss ratios & reserve levels across the industry. I anticipate analysts will try and get companies to nail down their COVID BI loss estimates.

No doubt there will be clients upset with their insurer and broker for not covering nor explaining the exclusions to them when they purchased BI cover. Lawyers will be happy. 

https://www.ckom.com/2020/04/04/class-action-lawsuit-filed-against-insurers-refusing-to-pay-business-interruption-insurance/



Libs

  • Sr. Member
  • ****
  • Posts: 256
My username is not a political statement.....and I'm too lazy to change it.

Cigarbutt

  • Hero Member
  • *****
  • Posts: 2418
Re: BRK and business interruption insurance
« Reply #5 on: April 11, 2020, 10:23:02 AM »
Business interruption insurance is becoming a huge issue for many US and UK primary carriers and reinsurers at large.
Commercial insurance exposure with contracts exposed to specific business needs are particularly sensitive to interpretation and litigation.

Retroactive coverage, which is basically what claimants are going after, would mean huge costs for the industry. It is likely that public entities directly or indirectly will pick up the tab but the transition period remains ill defined. At a minimum, litigation costs are expected to increase significantly and policy pricing is expected to increase for certain lines to an extent that entities looking to be insured will simply accept a clear exclusion clause.

https://www.dbrsmorningstar.com/document/359364.pdf?Expires=1586624996&Policy=eyJTdGF0ZW1lbnQiOlt7IlJlc291cmNlIjoiaHR0cHM6Ly93d3cuZGJyc21vcm5pbmdzdGFyLmNvbS9kb2N1bWVudC8zNTkzNjQucGRmIiwiQ29uZGl0aW9uIjp7IkRhdGVMZXNzVGhhbiI6eyJBV1M6RXBvY2hUaW1lIjoxNTg2NjI0OTk2fX19XX0_&Signature=Uyxg~dmC7rqVStSnZjIVN4m8FEDfhV9Svs9XbsaNnssRvPv4qhjj3YJXkqYZgF6vUQWU0G0ETUjJZ94IO71GKtThO9goW2uKJhl4vsrRz5rq49UsJgEwvRGFc5kXWcJ9K8V9M3PO4EATUef8fVK4SbmNP3DEbTwSEqxHyVdnDs6D4Inq~oQjDhMn5zlgWX5ofLx7otVS2Qta~snUuATWxQRCMkoqbRQ29-GbojxpT6-mXRj8~PR~vlUCK6ixR3cY1mW0G8GMmHZ1oh4TTVKL0pOrwxBg1j4E9rOo941izf6Ju1hcW4yoW2Xi5X1w3if7IAoy3rzC67RioaJjrWoW8gbOTCZW69cT8Vh-DtsAkb1eL71tzjEWUcm1~~JORbY7Ac7kIvb3PjYM6HvuCX0FzLMd-wZ4d9ZbXepjvNY1SdhSB7wqFlVN8s0MUouXUEMmEhAWV6MgxkUdIqF8TsXTdw2bFhfnAG0574D282o7HgOnitg6NM0ts7gTvLkX28p0KItwYVgEzWyis7OEqEljg08qRTdH1Qt2eoi48ko6dppxzzuQr7qD8Vz82~4PdAdW0wXRwoDcOPX2WGGaEfomeQT~KmOspqlr8l~cpilE623cZ-H38S4TtqWysxIoeVE32mihoWZoXGzDbuxMaaSVlNppkHJb3866sMQO1mmV0gk_&Key-Pair-Id=APKAI2JJS4PJDGONDEZQ

http://www.pciaa.net/pciwebsite/cms/content/viewpage?sitePageId=59762

It seems the issue is large enough for Mr. Buffett to eventually comment on publicly.

scorpioncapital

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2037
    • scorpion capital
Re: BRK and business interruption insurance
« Reply #6 on: April 15, 2020, 02:07:59 AM »
How exactly does it work that an insurer got a premium for NOT covering this risk and then the government says they must cover something they didn't get compensated for. I mean it's quite possible they go bankrupt.
Does it make any sense. If they had actually had premiums to consider the risk and now the government comes in and says it doesn't matter if you charged $1 you are liable for xxxxxxxx$. I expect a great legal fight.

Cigarbutt

  • Hero Member
  • *****
  • Posts: 2418
Re: BRK and business interruption insurance
« Reply #7 on: April 15, 2020, 06:14:24 AM »
How exactly does it work that an insurer got a premium for NOT covering this risk and then the government says they must cover something they didn't get compensated for. I mean it's quite possible they go bankrupt.
Does it make any sense. If they had actually had premiums to consider the risk and now the government comes in and says it doesn't matter if you charged $1 you are liable for xxxxxxxx$. I expect a great legal fight.
In a way, this is typical contract clause haggling and social insurance (redistribution) at play, only on a much larger scale. People are trying to share the pain.
It's perhaps helpful to read the last memo from Mr. Howard Marks who has been unusually bipolar lately. His last message (Knowledge of the Future) includes interesting passages. He seems to be troubled by the extent of collateral stretch by the Great Redistributor (and maybe that's preventing him from making money now, so potential bias).
"Markets work best when participants have a healthy fear of loss. It shouldn't be the role of the Fed or government to eradicate it."
Sometimes one shouldn't fear about fear but sometimes one should fear the relative absence of fear.

scorpioncapital

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2037
    • scorpion capital
Re: BRK and business interruption insurance
« Reply #8 on: April 16, 2020, 01:46:35 AM »
It's funny. Fear of loss as an incentive. Now we have fear of loss from government due to risks you had no way to foresee and explicitly excluded. Essentially...a tax!

RichardGibbons

  • Hero Member
  • *****
  • Posts: 840
Re: BRK and business interruption insurance
« Reply #9 on: April 16, 2020, 08:12:59 AM »
It's funny. Fear of loss as an incentive. Now we have fear of loss from government due to risks you had no way to foresee and explicitly excluded. Essentially...a tax!

It's far worse than a tax. It's a third party capriciously changing contracts after signing.