Amid the uncertainty of reopening the economy, insurance covers are adapting to the new normal, writes Chris Blackwell, managing director of Trilogy Underwriting Ltd

Insurance is there to help protect against the unexpected. But the period after the pandemic will also be another testing time as businesses begin to come out of hibernation and need protecting anew. Everybody calls this period ‘the new normal’, but nobody quite knows yet what it will look like.

Conversations are resuming with hospitality sector clients, and what we do know is the risk landscape is shifting and we need to engage with them more closely than before to ensure they have the right covers in place at the right time.

Uncertainty is the crucial factor, and we believe this requires new flexibility on the part of insurance. Previous policies will need to be amended, new covers will need to reflect changed risks, and pricing will need to be pragmatic, as brokers try to reconcile customers emerging from rock bottom and a hardening market for purchasing insurance.

In almost all cases, hospitality businesses have reduced revenues and a reduced wage bill. The overall sums being insured have changed. Restaurants are reopening at 50% capacity to cater to social distancing. Gyms are opening their doors again but with new Covid-19 risk management measures in place. Night clubs and live music venues are most affected and in some cases still considering what options are open to them.

Demand for new types of cover is still tentative. Cyber risk is one notable exception,^[1] as criminals have been eager to exploit the pandemic period and remote working has increased the risks many small and medium-sized businesses run.^[2]

We also think supply chains will be jolted by the economy’s reopening, as businesses resume trading at different speeds. The pandemic has already highlighted vulnerabilities on a global scale.^[3] Businesses will now need to manage the end of furlough and ensure they have staff back to work to cope, and reappraise their suppliers to ensure they can also respond to fresh demand over the coming weeks and months.

Amid these new realities, it is important to acknowledge that the cost of insurance is rising. Rates have risen by around 5% on average. This is hard to swallow for the insured, but for insurers it is almost universally recognised as a responsible necessity after years of soft pricing relative to the risks being underwritten.

We think this means some policies can be adjusted and reworded, temporarily and going forward, to ensure that clients have the right protection in place. For now, this means listening closely to clients needs, and showing willingness to be flexible in the policies we create.

^[1] https://techhq.com/2020/06/why-smes-are-increasing-budgets-for-cyber-insurance/

^[2] https://www.cambridge-news.co.uk/news/uk-world-news/security-expert-issues-stark-warning-18686025

^[3] https://www.weforum.org/agenda/2020/05/this-is-what-global-supply-chains-will-look-like-after-covid-19/