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Message from the CEO

COVID-19: Deciphering Business

Interruption cover for India

COVID-19: India Update

News & Insights

Marsh in the Media

CONTENT

NEWS&VIEWS July 2020

News&ViewsMessage from the CEO

INDIA

Dear All,

As we start our journey into the New Financial Year (2020–21) with great expectations, we are happy to bring to you the first quarter’s newsletter, News & Views.

The last financial year has been an eventful one and as we move into the new financial years, we face an unprecedented crisis of our generation: the COVID-19 pandemic.

Many new challenges have emerged, with governments worldwide taking steps to prevent the spread of COVID-19. However, these steps have impacted our way of life, the way we do business, and interact socially.

Colleagues from Marsh and Marsh & McLennan companies are helping businesses manage COVID- 19’s impacts while planning to manage future ones. Our colleagues are also helping them understand how insurance coverage may respond, manage claims processes, and address effects on people and operation.

Feature: COVID-19: Deciphering Business Interruption cover for India

The government’s various measures to stem the spread of the virus has impacted the businesses across the world. With many offices ceasing operations, various industries

have suffered heavy losses. The article talks about the Business Interruption Cover and its policy implications.

Feature: India COVID-19 Update:

This feature highlights COVID-19’s current impact in India and gives an update on the steps taken by the government to contain the virus.

The current edition of News & Views will also include our usual news and media segments.

We aim to make this newsletter a forum for discussion on issues relevant to the insurance industry and hope you find it informative and insightful.

We welcome your feedback and encourage you to share it with us. Write to us at contact.india@marsh.com

Warm regards,

SANJAY KEDIA Country Head and CEO Marsh India

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HOW DOES A BI COVER WORK?

DESIGNATED PERIL REQUIREMENT OR PERIL NOT EXCLUDED IN AN ALL RISK COVER

Commercial businesses procure BI policies to cover financial losses in their operations that generally arise from a designated cause such as a fire or an earthquake. If the insurance policy requires a designated cause of loss, but the loss does not qualify, the BI policy will generally not respond. An All Risk policy may not have a specific exclusion, but the following will exclude the cover.

DIRECT PHYSICAL LOSS

Commercial property policies also typically require “direct physical loss” to the property and proof of causation. In the event of a COVID-19 related BI claim, questions may arise as to whether this “physical loss” requirement has been met. In circumstances where a business has been closed as part of a mandatory or voluntary closure, but is otherwise still habitable and uncontaminated, it has probably not suffered a directphysical loss since infectious diseases arising from human-to-human transmission generally will not qualify as property damage.

Broadly, “direct physical loss” does not include consequential or resulting economic loss.

COVID-19: DECIPHERING BUSINESS INTERRUPTION COVER FOR INDIALockdowns and social distancing are challenges for various businesses across the country. With many office ceasing operations, various industries are suffering heavy losses. Globally, and on a niche level locally, the business interruption (BI) cover does provide some relief during such trying times.

WHAT IS THE CLAUSE OF A BI COVER?

The operative clause for such a cover states that:

The insurers agree that if during the period of insurance the business carried on by the insured at all the premises specified and listed in the Schedule is interrupted or interfered with in consequence of loss destruction or damage indemnifiable under Section I, then the insurers shall indemnify the insured for the amount of loss as hereinafter defined resulting from such interruption or interference provided that the liability of the insurers in no case exceeds the total sum insured or such other sum as may hereinafter be substituted therefor by endorsement signed by or on behalf of the insurers.

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SO, WHEN IS A LOSS, A DIRECT PHYSICAL LOSS?

The policy usually does not define “physical damage”.

In the absence of an definition for a term in a policy, usually court decisions are looked at. This is what international courts have decided, Indian courts are yet to be tested.

Courts cite the “widely accepted definition” of physical damage to property as a “distinct, demonstrable, and physical alteration” of its structure, e.g., visible damage resulting from fire or water. However, “direct physical loss or damage” is no longer so limited in many jurisdictions.

In an expanded interpretation, an actual, demonstrable contamination so pervasive that it renders the property uninhabitable and unusable.

WHY DO PROPHYLACTIC OR PREVENTIVE MEASURES NOT QUALIFY FOR THIS COVER?

Prophylactic or preventive measures to protect against future contamination, or shut down due to fear of contamination, generally will not qualify as a direct physical loss to property.

TYPES OF BI:

Different types of BI offer varied coverage levels, the basis of exclusions in the policy.

CONTINGENT BI

Other policies may provide contingent BI coverage arising from disruptions with a supplier or customer, while still requiring that the underlying cause fall within a designated cause of loss and arise from direct physical loss to property - like the policyholder’s coverage for a first-party loss. For businesses dependent on supply chain production, contingent BI coverage often provides coverage when a supplier suffers a direct physical loss to its property that impairs its ability to provide the delivery of goods or materials. Insureds in the manufacturing, hospitality, and health care businesses are some of the more common policyholders for this product line.

Please note, many contingent BI insurers require affected suppliers to be identified or scheduled in the insured’s policy for coverage to exist. Contingent BI policies are also likely to include the same exclusions found in a standard form first-party policy.

SPECIALISED BI

While traditional policies may not cover economic losses arising from the suspension of operations due to a health crisis or pandemic, the insurance industry has made various specialized products available.

“Infectious Disease Extension” Clause (The “Id Extension”)

This will specifically write coverage for this event (coronavirus pandemic) into the policy. Such clauses will add a closure of your business, or premises, due to an “order of a competent public authority as the direct and sole result of…any infectious or human contagious disease…” to the definition of loss” for the purposes of the BI cover.

Under an ID Extension, a governmental order must be the cause of your business or premises being shut down. In the absence of such an order, coverage may not be afforded. As such, documentation of any governmental order must be obtained and preserved for use in establishing your insurance claim.

An additional complication of coverage: certain policies contain language that requires the infection to be actually “present” at the location or upon the premises insured (which must be closed due to government order).

BY MARSH INDIA SENIOR TECHNICAL TEAM

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In May 2018, for example, Marsh, in collaboration with Munich Re and epidemic risk modeller Metabiota, launched PathogenRX, a fully integrated pandemic coverage product. The policy is customisable and can be tailored to provide coverage for specific expenses, geographies, types of disease, or portions of a calendar year.

In response to the Ebola crisis, several insurers expressly excluded coverage for Ebola-related claims. Other insurers, however, offered specific business interruption coverage to facilities such as hospitals, hotels, airports, shopping centres, restaurants, theatres and, gyms or any other business that might be forced to shut its doors because of an Ebola outbreak.

Obviously, in such circumstances, clients must be certain of their language requirements and that they have adequate documentation from authorities of:

1. When a closure is ordered; and

2. That such a closure is the result of the authority finding that the virus is present in the vicinit, or location, where it is required for policy coverage.

Closing your business as a precaution, without a virus being present, may endanger the coverage, so clients must tread carefully in this regard.

Another complication is the measurement of trading losses as insurers will likely factor the wider reduction in trade across the country/region and seek to adjust any trading losses of an insured against the current wider economic downward trends post the virus outbreak.( WAD provision may prove the ID coverage irrelevant for most of the clients.)

Hospitality and Health Care for Communicable and Infectious Diseases

The insurance industry offers specialised coverage arising from the shutdown of operations, in some circumstances without requiring physical loss to property. These policies or policy endorsements primarily focus on insureds in the business of health care and hospitality and typically extend insurance coverage for business interruption losses caused by “communicable or infectious diseases.”

Pandemic-Specific Coverage or Exclusions

Pandemic “scares” have prompted the insurance industry to offer specialised coverage and exclusions for pandemic events.

CONCLUSION

To prepare for the potentially catastrophic impact of a global pandemic or similar health crisis, policyholders and insurers should review their BI and Specialised BI policies to determine:

• If they are enough

• What new exposures and risks are present given the unique nature of the coronavirus

• Which current policyholders are likely impacted most

• The size, scope, and nature of earlier claims and what they may indicate

• The process to triage claims to ensure they are handled in the best interest of all stakeholders

The risk of a global pandemic with catastrophic consequences seems to grow more prevalent every few years. To prepare for the catastrophic impact of a global pandemic, clients are requested to review along with brokers to understand what is and is not covered under such policies.

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INDIA COVID-19 UPDATETIMELINE:

DATE SITUATION

30 JAN 2020FIRST CASE WAS CONFIRMED IN KERALA’S THRISSUR DISTRICT. A STUDENT WHO HAD RETURNED HOME FOR A VACATION FROM WUHAN UNIVERSITY IN CHINA, TESTED POSITIVE

13 MAR 2020 SUSPENSION OF NON-ESSENTIAL TRAVEL VISAS.

15 MAR 2020 100 TOTAL CONFIRMED POSITIVE CASES OF COVID-19.

16 MAR 2020 PASSENGER LAND BORDER CROSSING SUSPENDED.

22 MAR 2020 ONE DAY JANTA CURFEW WAS OBSERVED THROUGHOUT THE COUNTRY. PASSENGER AIR TRAVEL WAS SUSPENDED TILL FURTHER NOTICE.

25 MAR 2020 NATIONWIDE LOCK-DOWN IMPOSED TILL 14 APRIL 2020.

28 MAR 2020 TOTAL NUMBER OF CONFIRMED CASES REACHES 1000.

30 MAR 2020 100 INFECTED INDIVIDUALS RECOVER.

5 APR 2020 100 CONFIRMED DEATHS DUE TO INFECTION.

13 APR 2020 10,000 COVID-19 POSITIVE CASES IDENTIFIED. THE NATIONWIDE LOCK-DOWN EXTENDED TILL 3 MAY 2020.

14 APR 2020 1,000 CONFIRMED RECOVERIES FROM COVID-19 INFECTION.

19 APR 2020 500 INDIVIDUALS CONFIRMED DEAD DUE TO INFECTION.

22 APR 2020 20,000 CONFIRMED CASES OF COVID-19 INFECTION.

25 APR 2020 5,000 CONFIRMED RECOVERIES FROM COVID-19 INFECTION.

29 APR 2020 30,000 CONFIRMED CASES OF COVID-19 INFECTION.

29 APR 2020 1,000 INDIVIDUALS CONFIRMED DEAD DUE TO INFECTION.

1 MAY 2020 THE NATIONWIDE LOCK-DOWN EXTENDED TILL 17 MAY 2020.

2 MAY 2020 10,000 CONFIRMED RECOVERIES FROM COVID-19 INFECTION.

Below is a brief timeline of COVID-19 events in India.

7 MAY 2020 50,000 CONFIRMED CASES

17 MAY 2020 NATIONWIDE LOCKDOWN FURTHER EXTENDED TILL 31 MAY

19 MAY 2020 100,000 CONFIRMED CASES

23 MAY 2020 50,000 CONFIRMED RECOVERIES

27 MAY 2020 150,000 CONFIRMED CASES

30 MAY 2020 LOCKDOWN EXTENDED IN CONTAINMENT ZONES TILL 30 JUNE

31 MAY 2020 5,000 CONFIRMED DEATHS

3 JUNE 2020 100,000 CONFIRMED RECOVERIES

13 JUNE 2020 300,000 CONFIRMED CASES

27 JUNE 2020 500,000 CONFIRMED CASES

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GOVERNMENT RESPONSE:

1. Prime Minister Narendra Modi implemented the Disaster Management Act, 2005, issued an order for state/union territories prescribing a lockdown for the containment of COVID-19 pandemic. The lockdown was initiated for a period of 21 days with effect from 25 March2020.

2. So far, India’s response to COVID-19 has been pre-emptive, pro-active, and graded with a high-level of political commitment, and a ‘whole government’ approach.

3. All incoming international flights have been suspended and as of 25 March (through an order) an extension of suspension has been made till 14 April 2020.

4. Indian Railways issued an order that the period from 22 March to 14 April will be treated under “Force Majeure”. Passenger movement has been restricted including inter-state travel, all efforts to ensur availability of essential commodities through its uninterrupted freight services in place.

CURRENT SITUATION:

Latest information regarding COVID-19 in India is available at https://www.mohfw.gov.in/.

As of July 9, 2020, more than 7,67,296 COVID-19 cases have been reported in 29 states/union territories. These include 476378 who have been cured/discharged, and 21129 deaths. In terms of confirmed cases, India currently has the largest number in Asia and has the third highest number in the world. However, India’s case fatality rate is relatively low at 2.8% compared to the global average of 4.7% as of July 6, 2020.

INCLUSION CRITERIA FOR TESTING OF COVID-19

To be suspected for COVID-19, the individual will have at least one of the below-mentioned criteria:

1. All symptomatic people who have history of international travel in last 14 days had come in contact of confirmed cases:- Are healthcare workers.- Are hospitalized patients with Severe Acute Respiratory Illness (SARI) or Influenza Like Illness (ILI) or severe pneumonia.

2. Asymptomatic direct and high-risk contacts of confirmed cases should be tested once between day 5 and day 14 of coming in his/her contact. Direct and high-risk contact include:- Those living in same household with a confirmed case- Healthcare workers who examined a confirmed case without adequate protection as per WHO recommendations

5. On 30 May, the MHA announced that the ongoing lockdown would be further extended till 30 June in containment zones, with services resuming in a phased manner, starting from 8 June, in other zones. It is termed as "Unlock 1".

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OTHER NEWS AND INSIGHTS

IRDAI PERMITS INSURERS TO GRANT MORATORIUM ON TERM LOANS

The nation-wide lockdown would have affected term loan borrowers on a large scale. To curb and control this, various representatives from industry associations sought a moratorium from the IRDAI, after a circular citing the approval from the Reserve bank of India was submitted.

IRDAI has accepted the request, but with certain conditions.

Link: https://economictimes.indiatimes.com/industry/banking/finance/insure/irdai-permits-insurersto-grant-moratorium-on-term-loans/articleshow/75048816.cms

INSURANCE COS START OFFERING EXCLUSIVE COVID-19 POLICIES, PARTNERING WITH ONLINE PAYMENT FIRMS

Amidst the pandemic spread in the country, many insurance companies have taken this as an opportunity to offer policies specific to COVID-19.

As per officials, some of them have partnered with digital payment service providers to push sales of such plans.

Industry experts are not impressed with the policies however, as they feel buying separate policies to protect from the disease for people who are covered under general health insurance plans holds no real value.

Link: https://economictimes.indiatimes.com/industry/banking/finance/insureinsurance-cos-start-offering-e clusive-covid-19-policies-partnering-with-online-payment-firms articleshow/75030522.cms

INSURERS KEEP A SOCIAL DISTANCE FROM RISKY COVID COVERS

The scenario surrounding Covid-19 has led to very few Indian insurers selling or marketing the cover for the virus.

Rather than a profit-making businessopportunity, they are seeing it more as a liability owing to the overwhelming number of patients and the medical expenses that accompany.

Jayesh Gadekar, Head — Health and Benefits, Innovative Solutions at Global Insurance Brokers, stated, “In an unprecedented global pandemic situation there are high price risks. The spread of the disease globally also makes getting reinsurance support much harder.”

Link: https://economictimes.indiatimes.com/industry/banking/finance/insureinsurers-keep-a-social-distance-from-risky-covid-covers/articleshow/75001044.cms

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IRDAI BANS CAPTIAL GETTING TREATIES BY INSURERS

The term “capital gearing” refers to the relativity between the amount of debt of an organisation and its equity. The Insurance Regulatory and Development Authority of India (IRDAI) has asked insurers not to initiate any treaties related to capital gearing.

Speaking to the insurers, Pravin Kutumbe, Member — F&I, IRDAI said, “It has been observed that some of the insurers have entered into capital gearing treaties in various forms, including Quota Share Reinsurance Treaty. The Authority is of the view that such capital gearing treaties are of the nature of financialarrangements and not primarily a risk-transfer mechanism.”

Link: https://www.thehindubusinessline.com/economy/policy/irdai-bans-capital-gearing-treaties-by-insurers/article31203342.ece

SETTLE RELATED MEDICLAIMS QUICKLY, INSURANCE COMPANIES TOLD BY IRDAI

Following the directives issued by the IRDAI, insurance companies have been asked to settle COVID-19 related mediclaims on priority. The stipulation is a person diagnosed with the coronavirus, should be hospitalised at least for 24 hours.

In a circular, the IRDAI narrated to insurers the ideal design of COVID-19 related products. The circular read, “For the purpose of meeting health insurance requirements of various sections, insurers are advised to design products covering the costs of treatment for coronavirus.”

Link: https://www.livemint.com/news/india/settle-coronavirus-related-mediclaims-quickly-insurance-companies-told-by-irdai-11583911295811.html

COVID-19: IRDAI ISSUES LOCK-DOWN GUIDELINES FOR INSURERS

Special guidelines have been put into place to insurers by the IRDAI following the lockdown of 75 districts in the country.

They have been asked by the regulator to carry on business as usual telephonically and digitally, so as not to disrupt their operations.

Link: https://www.thehindubusinessline.com/money-and-banking/covid-19-irdai-issues-lock-down-guidelines-for-insurers/article31149361.ece

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MARSH IN THE MEDIA

JANUARY 2020

JAN 2

M Suresh, CEO Consumer and Healthcare Business Marsh India was quoted by Asia Insurance Review, in their January 2020 issue in an article titled, “Is India ready to get old?”.

The article reflects on how the Indian health insurance industry is placed to handle the increasing proportion of the elderly population as the country’s demographic dividend wanes and the nation grows older.

Link: https://www.linkedin.com/posts/marsh-india_is-india-ready-to-grow-old-activity-6618360220462698496-veDq

FEBRUARY 2020

FEB 25

Sanjay Kedia, Country Head and CEO, Marsh India was a part of the CNBC Panel on “Significance of POTUS visitand the future imperatives on the US-India economic relationship”.

“The dialogue is around risk and challenges of doing business in India and that is still a very big subject. The strength of India is its democracy. The opportunity and strength are far bigger than the challenges,” Sanjay said during the discussion.

Link: https://www.cnbctv18.com/videos/economy/us-india-trade-we-employ-10000-engineers-in-india-says-rajen-vagadia-of-qualcomm-5370771.htm/

Video Link: https://lnkd.in/eP6W7G

FEB 27

Marsh India Country Head and CEO, Sanjay Kedia was quoted by Business Standard in an article, “BS Insurance Round Table 2020: Predatory pricing slammed, sandbox lauded,” on February 27, 2020. Sanjay was one of the panelists at the annual BS Insurance Roundtable.

While deliberating on various issues, Sanjay said that the Indian insurance industry needs more innovation when it comes to broadening the coverage of the insurance policies for big corporates. “Indian companies today are typically demanding innovation in coverage, such as tailor-made plans for the steel and pharma industry, as they are competing on the global front,” he said.

Link: https://www.business-standard.com/article/finance bs-insurance-round-table-2020-predatory-pricing-slammed-sandbox-lauded-120022601346_1.html

MARCH 2020

MAR 4

Marsh India Country Head and CEO Sanjay Kedia was quoted by Times of India in an article titled, “India Inc not covered, but insurers could be hit”.

“The property insurance in India and globally excludes the non-damage risk for business interruption,” Sanjay said.

Link: https://timesofindia.indiatime . com/business/india-business/india-inc-not-covered-but-insurers-could-behit/articleshow/74467699.cms?utm_medium=referral&utm_ campaign=iOSapp&utm_source=WhatsApp.com

MAR 4

Marsh India Country Head and CEO Sanjay Kedia was quoted by The Telegraph in an article titled “Health Insurance Cover for Coronavirus”.

“Like in the case of any other flu,basic or normal mediclaim policy is applicable,” Sanjay said.

Link: https://www.telegraphindia.com/business/health-insurance-cover-for-coronavirus/cid/1750804

MAR 29

Arjun Sharma, Vice President, Sports and Entertainment Leader, Marsh India, was quoted by the Hindu Business Line in an article titled, “With no pandemic cover, IPL and other events unlikely to get insurance.”

The article discusses the impact on the claims due to event cancellation on the account of the COVID-19 outbreak.

Link: https://www.thehindubusinessline.com/money-and-banking/with-no-pandemic-cover-ipl-and-other-events-unlikely-to-get-insurance-payouts/article31189710.ece

About Marsh

A global leader in insurance broking and innovative risk management solutions, Marsh’s 35,000 colleagues advise individual and commercial clients of all sizes in over 130 countries. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With annual revenue over US$15 billion and nearly 75,000 colleagues worldwide, MMC helps clients navigate an increasingly dynamic and complex environment through four market-leading firms. In addition to Marsh, MMC is the parent company of Guy Carpenter, Mercer, and Oliver Wyman. Follow Marsh on Twitter @MarshGlobal; LinkedIn; Facebook; and YouTube, or subscribe to BRINK.

Marsh India Communications Team.

For any information, please contact: NILADRI BHATTACHARYA niladri.bhattacharya@marsh.com

Disclaimer: Marsh India Insurance Brokers Pvt Ltd is a joint venture between Marsh International Holdings Inc. and its Indian partners. Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer and Oliver Wyman. This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy.

Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any modeling, analytics, or projections are subject to inherent uncertainty, and the Marsh Analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change. Insurance is the subject matter of the solicitation. For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

Marsh India Insurance Brokers Pvt. Ltd’s corporate and the registered office is at 1201-02, Tower 2, One Indiabulls Centre, Jupiter Mills Compound, Senapati Bapat Marg, Elphinstone Road (W), Mumbai 400013. Marsh India Insurance Brokers Pvt. Ltd is registered as composite broker with Insurance and Regulatory Development Authority of India (IRDAI). Its license no. is 120 and is valid from 03/03/2018 to 02/03/2021. CIN: U66010MH2002PTC138276.

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