We are Here

Clearly the ongoing situation is causing significant personal and economic disruption around the world. Lockton’s Transactional Risks team are working remotely but are still obtaining terms and binding W&I policies. We are all available by email or phone as normal. Our clients remain the most vital part of our business and no virus will change that. To you all, we are here for any questions you may have on any other insurance lines – Lockton’s experts are available across all business lines.

 If you have any questions or there are any additional ways that we can support you, then please do let us know. And most importantly, we wish good health for you and your families.

 For the immediate impacts that we are seeing from Corona virus on W&I policies please see below.

 Exclusions

We are seeing COVID-19 exclusions included in more terms from insurers. The impact on a business resulting from COVID-19 is not something that can be underwritten to, and is clearly still evolving hence could have various knock on effects impacting the warranties. Insurers are placing increased scrutiny on breaches of customer contracts, employment related issues, IT/Data protection, supply chain issues or even simply a target’s business continuity planning which may lead to qualifications to the respective warranties.

 Underwriting

From ongoing discussions with insurers, we understand that they will want to:

1. Test the impact on the Target Group where there are warranties speaking to ongoing activities. You can expect to see enhanced questions around matters such as customers cancelling or reducing orders or trading partners with potential solvency issues, force majeure clauses in material contracts, review of business continuity/ interruption planning (from a processes and IT systems perspective), as well as generally understanding the impact on the business as a result of travel restrictions and individuals self-isolating.
2. See that the buyer has still been able to do its normal course physical due diligence, e.g. site visits, physical inspections, etc. Underwriters would not expect to be a back stop for social distancing induced poor diligence. 
3. Financial diligence will be expected to be more thorough both at signing and closing in terms of considering matters such as insolvency risk of target, whether AR reserves are GAAP compliant, or whether accounts receivables and accounts payable are actually being paid on time. Customers are likely to start to struggle to pay their bills and companies may take longer to pay its own bills as a result if it is not cashflow heavy.