COVID-19- What to consider the business implications?

The outbreak and rapid spread of the coronavirus disease (COVID-19) has roiled markets and disrupted supply chains, threatening the global economy. It is also forcing companies to confront a host of hard questions about how they can and should conduct business during a global public health crisis. Containment measures, including lockdowns of cities, extensions of public holidays, closures of public services (e.g. courts), cancellation of events, unprecedented “work from home” arrangements, international travel restrictions and quarantine measures are having worldwide impacts, causing great disruptions across the globe.

This disruption will directly affect business and their legal teams. So, here's a checklist of issues that the boards need to be aware of:

1. Crisis management
2. Employment issues
3. Business continuity
4. Communication is key
5. Financial reporting
6. Financial regulatory

Although, most companies already have business continuity plans, but they may not fully address the fast-moving and unknown variables of an outbreak like COVID-19.

What makes insurance different?

Insurance companies play a pivotal role during times of economic stress by helping companies and households manage risks and cushion against losses. Due to the ongoing pandemic, the demand for life and health insurance policies has seen a huge spurt over the last couple of days as coronavirus (COVID-19) positive cases started growing. Although the industry always records a strong growth in March, this year the growth is stronger, digitally, compared to average 10 per cent growth logged in previous years.

However, keeping the digital players aside, the trend is opposite for traditional insurers, who sell their products primarily via insurance agents. There has been a gradual decline in policies sold from the first week of March to the fourth week as sales managers and insurance agents are unable to meet customers.

Issues the insurance industry might face:
• Internal and external communications are of utmost priority right now. Your company’s attitude towards a stressful event can mould your employee’s attitude as well.
• You may face reputational or litigation risks if your firm is seen as neglecting policyholder concerns or dismissing employee concerns or safety.
• Cybersecurity is also a key part of crisis management, because there can be additional vulnerability in the middle of a storm.

Steps to consider:

You’ll want to reassess the reliability and validity of your company’s valuation policies, models and controls to reflect the increased valuation risk or reduced price discovery in the new environment, particularly in light of ultra-low interest rates.

In general, you’ll want to make sure that your loss recognition testing models include current market data and best-estimate assumptions.

Firms may need to make additional provisions for what could become adverse circumstances.

You might want to evaluate your ability to update disclosures, even in volatile circumstances.