How reinsurers will respond when cedents pay their insureds for COVID-related business interruptions remains an open question, legal and insurance professionals suggested recently, adding more wrinkles to an already complex claims situation.

Illustrating some of the specific reinsurance coverage questions that are arising from COVID-19 business shutdowns, Ernesto Palomo, a partner in Locke Lord’s Business Litigation and Arbitration group, presented several scenarios during the Casualty Actuarial Society Seminar on Reinsurance earlier this month. In each hypothetical scenario, he assumed that primary insurers paid business interruption claims under policies that did not have virus exclusions, and ceded losses to their reinsurers under reinsurance contracts with “follow-the-fortunes” language.

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