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COVID-19 AND IT’S IMPLICATION ON

FINANCIAL LINES POLICIES
COVID - 19: Impact on Indian Companies
COVID - 19: Impact on Global Economy
Global Economy: Manufacturing Power
Indian Economy: Sector wise contribution
COVID - 19: Negative Trade Impact of Global Economy

All the figures are in USD Million

Source: United Nations Conference on Trade and Development

 COVID - 19: Effects on Liquidity & Profitability of Industries

Coronavirus impact Impact on industry varies….

matrix …financial industry will be less impacted in ST liquidity, low interest rates and
monetary policy will provide aid during the crisis, although inevitable
While some industries while face either liquidity or profitability problems, Retail & WS, bankruptcies will lead to reduced cash inflows

Manufacturing, transport or Hotels & Restaurants will be suffering both Profitability

…construction firms who have contractual obligations to stay on schedule or
risk incurring significant financial penalties in 2020

High

Accommodation &
Construction Restaurants …Manufacturing will see both supply and demand shocks. The supply shock will
be exacerbated by falling demand
Retail
…Transport industry is seeing a big drop in profitability as production
Finance and Insurance
Manufacturing stops, but the rebound effects when the situation relaxes. Cancellation for
airlines have led to a cash shortage
Profitability impact 2020

Wholesale
Transport* and Liquidity and …Retail / Wholesale and Restaurants are seeing drastically reduced
Electricity & Storage profitability demand, leading to a shortfall in sales. New spending priorities for
customer could reduce even more sells until late 2020
Gas

Health and Community ... liquidity situation is exacerbated by the current price war between Saudi
Services Mining Cultural and Recreational Arabia and Russia and might affect profitability for electricity & gas industry
Services the future

Communication Property and Business Services

Education
…Mining will see both supply and demand shocks.

Low Short-term liquidity impact High

Liquidity …Liquidity will be a problem in the short term for SME business service
companies and might lead to some bankruptcies in the future. Fiscal policy
• Source: AIG & Roland Berger started by governments will reduce the impact.

(*) Include airlines

Excluded of the matrix: Government Administration and Defence // Personal and
Other Services
COVID - 19: Sectors Impacted
COVID - 19: Impact on Financial Lines Policies

Directors & Officers Liability

Risks associated with D&O liability are among the main exposure that are top of mind. In the
context of this pandemic, the risks may include: a. The adequacy and accuracy of disclosures
in a financial/business environment; b. Regulatory and compliance uncertainty in facing
unparalleled events and responses by authorities; c. Fiduciary and other duties owed etc. Employment
D&O
Practice
Liability
Professional Liability Liability
The uncertainty consequences of Covid crisis are overwhelmingly & likely to push economies
around the world into a recessionary phase. And the lessons of all preceding recessions in the
modern era is that they lead to a material increase in professional liability claims, invariably
linked to economic and asset value movements and business failures.

Professional
Cyber
While the world is focused on the health and economic threats posed by COVID-19, Liability
cybercriminals around the world undoubtedly are capitalizing on this crisis. It has increased
the cyber security risk due to the remote working environment.

Crime
Any financial crisis, especially one as pronounced as that triggered by the coronavirus (COVID-
19) pandemic, puts companies at heightened risk for Employee fraud as well as Impersonation Cyber Crime
fraud and fraudulent fund transfer fraud.

Employment Practice Liability (EPL)

Impact on EPL policies due to reduced wages, how should employers handle employee
quarantine cases wrt employment? The risk created from decisions about layoff, furlough or
reduction in hours. How employers react on employees request to refrain from public travel
that might expose them to COVID-19.
COVID - 19: Exposure on Financial Lines Policies

•Company Security Section: - Allegations of managerial misconduct brought by stakeholders.

- Loss of stakeholder value by Bankruptcies / Insolvency.
- Suspension of dividends to shore up financials or capital positions
- Capital raises causing shareholder dilution
- Breach of fiduciary duty and corporate mismanagement.
Directors & Officers
•Regulatory Investigation: - Drop in asset values will lead to potential misconduct, market manipulation of public stock price
Liability
- Investigation with respect to Insider trading, use of approved Business Continuity Plan or allegation with respect to breach of
government instructions during COVID-19 situation and other issues.

•Bodily Injury carve back: - Policy will extend defence cost with respect to bodily injury claims on the D&Os in their supervisory role.
•Side A Cover: - There will be a unprecedented increase in Side A claims where companies are financial incapably of indemnifying their
managers due to liquidity issue.

•Employment Practice Violation: - Employees suing managers/company on charges of differential treatment in a layoff or salary cut situations.
- Wrong HR practices or failure to provide conducive environment to work related claims.
Employment Practice - Redundancy or reduced compensation related issues will lead to EPL litigation.
Liability (EPL) - On discrimination charges.
COVID - 19: Exposure on Financial Lines Policies

•Data Liability: - Cover 3rd party allegations of professional misconduct against a policyholder in protecting employee/customer data and,
direct policyholder loss/costs to remediate computer systems, as well as costs for legal & professional advice following a
cyber breach.

• Cyber Extortion: - Increased frequency of cyber extortion / malware attack in work from home environment
• Electronic Data Incident: - Policy will pay the recreation cost where backup systems fail to capture such Third Party Data in remote work environment
•Regulatory Investigation: - Drop in asset values will lead to potential misconduct, market manipulation of public stock price
- Investigation with respect to Insider trading or allegation with respect to breach of government instructions during COVID-19
Cyber situation and other issues.
• Network Interruption: - Which may not be result of government or public authority action like lockdown but due to stressed new operating
environment leading to security/system failure results in NI.
• Other Exposure leading to 1st Party Expenses: - Potential issue with staffing (less eyes on the network) and budget related to ongoing cyber security.
- Issues with quick enforcement of workforces Working From Home – upholding network security and Data privacy standards

•Breach of Professional Duty: - 3rd party allegations of professional misconduct brought by customer or failure to delivers services insured is expected to
provide.
- Failure to execute services in a timely fashion, resulting in customer damages.
Professional - Suitable recommendations on dropping asset values, particularly for financials institutions like banks and investment advisors,
and recession-prone industries like financial planners, mortgage brokers, realtors
Indemnity - Increase in breach of IPR related claims in Work From Home scenario.

• Employee Fraud: - Work From Home means less, use of BYOD, use of personal emails and phones will inevitable test security, procedures and
protocols.
- Increase in Phishing and Impersonation Fraud leading to monitory loss to 1st Part Financial Loss.
Crime - Work From Home provide unique opportunity to cyber criminals with respect to Fund Transfer Fraud crime.
COVID - 19: Lessons 2 Learn from this pandemic

https://joshbersin.com/2020/04/responding-to-covid-19-ten-lessons-from-the-worlds-hr-leaders/
1/ Remote Work is Real and It’s Big.
2/ Personal Safety and Health Is Paramount
3/ Going Digital Is Imperative
4/ Caring, Listening, and Empathy Are Priority
5/ Distributed Authority Is Key
6/ Do Less With Less
7/ Move Fast And Come Together
8/ Real-Time Data Really Matters
9/ Continuity Planning Is Vital: Black Swan Events Happen All The Time
10/ Leadership Matters. More Than Ever
References:

Impact on Global Economy: Source: Credit Suisse

Global Economy - Manufacturing Power: Source: UNSD
Indian Economy: Sector wise contribution: Source: RBI
COVID - 19: Negative Trade Impact of Global Economy: Source: United Nations Conference on Trade and Development
COVID - 19: Sectors Impacted: Source: Avalon Consulting Research and Analysis
COVID - 19: Effects on Liquidity & Profitability of Industries: Source: AIG and Roland Berger
COVID - 19: Lessons 2 Learn from this pandemic: Source: https://joshbersin.com/2020/04/responding-to-covid-19-ten-lessons-
from-the-worlds-hr-leaders/

Disclaimer:
The terms and definitions in this presentation are for informational purposes only and may or may not be like those found in the
respective policy documents. Please refer to your policy for applicable terms and conditions.