EIOPA has published a supervisory statement on exclusions related to systemic events such as pandemics, natural catastrophes or large cyber attacks. COVID-19 and the invasion of Ukraine by Russia are just two recent examples of such events.
Key issues identified by national competent authorities (NCAs) are:
- product complexity and unclear policy wording in insurance contracts magnifying uncertainty over coverage and causing increases in complaints and disputes;
- following systemic events, insurance manufacturers often reviewing existing products to clarify wording on exclusions, or to include new exclusions, without a proper application of product oversight & governance (POG) rules; and
- new products being advertised as offering protection for risks arising from systemic events even though issues with expectations on coverage have been identified.
Particularly given the recent litigation over business interruption coverage in Ireland, insurers should read and take note of the steps that EIOPA recommends manufacturers take where a systemic event becomes uninsurable or there is ambiguity as to whether risks are covered.
NCAs are likely to focus on compliance with POG requirements in respect of exclusions regarding systemic events, in new or existing products, as a result of this supervisory statement.