COVID – 19 (are virtual happy hours our future?)

man-having-glass-of-white-wine-looking-at-laptop-royalty-free-image-1584450201Day Five of our quarantine. My family made the decision to self-isolate when my son returned from San Francisco this past Monday. His work took him on the subway, he was working in a restaurant downtown, and he took a cross-country flight so it seemed like a no brainer. Certainly, it is a little easier to self-isolate in rural Vermont than in downtown New York, or even Burlington, Vermont.

We are certainly in strange times and unchartered territory for most of us – even those of us whose job is risk management! I have found myself rationalizing that things can’t get that bad and that it will clear up soon, even with the reality slamming us in the face. It is hard for any person, company or government to jump to more draconian measures, even when we see what is happening in other places hit by the virus before the United States. A little dose of paranoia might make us, as a society, get a little ahead of the curve. Maybe its time to trust your inner Cassandra*.

That being said, my wife and I joined a few friends of ours on a virtual cocktail hour last night. I opened a bottle of wine, brought out some cheese, and then connected with the two other couples through videoconferencing. It sounds a little silly, but it worked great – and we were able to get a dose of social interaction at our kitchen table!

It still doesn’t explain why for some reason I stocked up on potato chips and Ben & Jerry’s last Sunday…

Thank you and stay safe!

Rich Smith
VCIA President

*Cassandra was a woman in Greek mythology cursed to utter true prophecies, but never to be believed. In modern usage her name is employed as a rhetorical device to indicate someone whose accurate prophecies are not believed.

COVID – 19 (redux)

mapWow…. what a week. It’s hard to get my head around the speed at which the coronavirus has spread and its impact around the world. Countries in virtual shutdown, borders closed, business at a near standstill in many places.

Since last Friday, the news of major conferences cancelling (or at least postponing) is astonishing but warranted. One of the captive insurance industry’s major events is the CICA conference. Having had to cancel is truly a heartbreaking choice, but Dan Towle made the right choice – as painful as it was.

Dan was kind enough to contact me soon after he made the decision and walk through the decision matrix, as well as some of the hurdles he still faces in resolving all that needs to be resolved when you cancel a conference like his. He described the calls and discussions with his board and key members of his organization before having to make such a tough call.  One of the things that resonated with me from our conversation was the need to take a step back from the event you are planning and ask yourself “are we really asking people to travel and meet in a large group with this uncertainty?” With the news that followed of the growth in infections just days later it was clearly the responsible decision.

VCIA and the State of Vermont had to grapple with much the same choice when we decided to postpone the trade mission we had scheduled to Mexico City later this month – at a much less heartbreaking scale than Dan of course. Still, it was disappointing. That being said, it was much easier for us to reschedule, which we have done. The trade mission to Mexico City has a new date of September 22nd.

As for the VCIA conference in August, we are proceeding on schedule, with the hope that all this will be behind us by then. Like Dan, we may be faced with a tough choice come summertime, so I plan to stock up on Pepto Bismol in the meantime.

Thank you and I look forward to hearing from you!

Rich Smith, VCIA President

COVID – 19

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The complexity and uncertainty of the coronavirus or COVID-19 outbreak is worrisome, to put it mildly. As of this writing, the virus has infected 90,000 people and left more than 3,000 people dead, mostly in China, but the spike in cases around the world remind me of those doomsday movies where it shows a map with the plague hopping from one place to another with ease.  When we get mixed messages from our leaders, and health experts debate the proper response, it is not surprising to see a growing anxiety in the general populace.

I have heard from two large companies in the insurance world that have very different responses for their employees. One has banned all non-essential travel not only overseas, but here in the US as well. The other has taken a more wait and see approach, advising employees to use “common sense” when traveling. Many businesses have asked their employees to work from homes – which won’t help someone on the factory floor or who works in a restaurant.

A couple of things come to mind as I try to get my head around the potential impact to captives. First, most traditional insurance policies have exclusions for pandemics in their policies. According to the Insurance Journal, the world’s largest insurers learned lessons from previous health crises, including the 2003 SARS outbreak, and have tightened up their policies, inserting communicable-disease exclusions to prevent potential losses. That means consumers and companies will bear the brunt of the cost for disruptions related to the virus. Whether captive insurance can help mitigate potential losses is something that we have begun to look into more closely.

The other impact is something captives and traditional insurers have been dealing with for some time. Investment returns have been stingy for the insurance world for many years and many have diversified away from more traditional bonds to equities. Investment losses rather than claims will likely cause the biggest hit to insurers from the coronavirus outbreak, according to a report from Moody’s Investor Services Inc.  Moody’s said, “A prolonged period of market weakness would also hurt insurers’ investment income and reduce their access to capital…”

As for me, I seem to swing back and forth after every news story I hear on the virus on what “common sense” means. Without a doubt, the COVID-19 has already had an impact on the world economy and our general sense of health and safety.  I believe in the resilience of the captive insurance industry and know that many of the people involved with risk management at their organizations will play an important part in stemming this outbreak.  Let’s all hope that we see the end of this sooner rather than later.

Thank you and I look forward to hearing from you!

Rich Smith
VCIA President