Management Services International (MSI) will host a webinar on April 8 at Noon EDT to educate advisors in the insurance industry about how captives can help companies better manage the risk around pandemics.
The webinar is aimed at advisors such as insurance agents and brokers, financial planners, CPAs and lawyers, that themselves advise businesses about how best to manage their insurance portfolios. It will show how companies that used their captive to write their business interruption coverage are currently benefiting from the arrangement.
This should encourage brokers, agents and other advisors to consider offering captive solutions to their clients in the future, to ensure more businesses are better prepared when another pandemic strikes.
The webinar will feature Jeremy Colombik, president of MSI, and John Dohn, its national sales manager. It will last approximately half an hour and will cover some of the basics about captive insurance, including what it is and in what situations it can be used. “We anticipate a lot of people watching the webinar will have limited knowledge about captives,” explained Dohn. “We wanted to keep it short, because there are a lot of distractions out there - especially right now - and we want to make sure we keep people engaged. We wanted to put the idea out there, and then advisors can think about it and come back to talk to us individually to find out more about the details.”
MSI believes the current moment is a perfect illustration of the benefits that captives can deliver to their owners. Many companies have business interruption policies that they expected to protect them in the event of unforeseen circumstances affecting their ability to do business. Unfortunately, many are finding that the policies they had do not cover them in this scenario.
Dohn said: “In the US we have boilerplate insurance used by many commercial insurance companies. These business interruption policies usually require physical damage to property which does not happen with COVID-19, and there are specific exclusions for virus and bacteria. While it is possible for insurance companies to change boilerplate language, it does not happen often.”
While businesses may be frustrated about this, Dohn said it makes sense for commercial providers to exclude this coverage, given the extent of the losses they would face if they included them. However, because they tend to operate with only one, or a very small number of clients, captives are better placed to offer this kind of coverage, he said.
Dohn added: “Most captive policies have few exclusions written into them, and so most business interruption written through a captive will pay claims, where similar policies written by commercial providers will not. This is a really hard lesson for US-based businesses: you have to be really careful to look at exclusions.”
Without captive business interruption and related policies there is not much that can be done for businesses currently facing crippling losses that had not written business interruption coverage through their captive, said Dohn. However, he argued now is the right time for brokers and agents to start thinking about how they should help prepare their clients for the next pandemic, or other unforeseen event.
“Many businesses have resorted to using lines of credit from their banks. Other business owners may need to liquidate their assets to raise the cash to pay their bills. Those are the companies that will be thinking about the future, and how to make sure they are prepared next time something like this happens,” concluded Dohn.
John Dohn, Jeremy Colombik, Management Services International, MSI, COVID-19, Business interruption