The longer and further that COVID-19 spreads, the more likely it is that there will be disputes as to whether or not COVID-19 related losses can be aggregated by (re)insureds for the purpose of (re)insurance claims.
Many individual COVID-19 related claims will be too small on their own to reach the attachment point of most excess of loss or catastrophe reinsurance treaties. If aggregated, however, they might well be within the scope of the excess layer or the reinsurance cover.
The aggregation question is not only of interest in the context of Property and Business Interruption Claims. It will also arise in other lines of business underwritten in Bermuda and the Cayman Islands, including, Workers’ Compensation, Accident, Health, Travel, Event Cancellation, D&O Liability, Professional Liability, Medical Malpractice Liability, and Employment Liability.
The most common type of aggregation clause is one that groups losses or claims by reference to a single “event” or “occurrence“; or, in the context of liability insurance, by reference to “similar” or “related” acts or omissions.
A standard form aggregation clause in a reinsurance contract, for example, might be as follows:
In the case of COVID-19 related liabilities, can it be said that they have all arisen from similar acts or omissions in a series of related matters or transactions?
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Aggregation of Losses under English, Cayman Islands, and Bermuda law: A COVID-19 reminder for Insurers and Reinsurers