Insurers brush off natural gas rationing as basis for BI claims

European insurers are brushing off talk of mass business interruption (BI) claims from potential rationing of natural gas with word that no property damage equals no grounds for payouts.

“It appears to us that this will not be the source of material claims,” analysts at the Jeffries brokerage claimed after talks with industry leaders, notably at  Allianz and  Munich Re.

Hints of business interruption claims are a panic-trigger on the market since the pandemic and lockdowns triggered a wave of claims and lawsuits, exposing terms and conditions written for altogether milder and more localised conditions. Commodity rationing could sound a lot like the government-imposed pandemic restrictions that triggered the mass wave of 2020 lawsuits.

But claims are not likely if the trigger event isn't tied to property damage, industry representatives have argued for Jeffries.

“Most insured business interruption cover comes in the form of an add-on to property policies, making business interruption related claims contingent on an underlying physical damage claim,” analysts said in a note to soothe investor nerves.

It remains “difficult to envisage” how top-down rationing or restrictions could fulfil the basic requirements of a property policy add-on, analysts Philip Kett (pictured left), James Pearse (pictured centre) and Minh Duong (pictured right) wrote.

Chemical, fertiliser and glassmaking are amongst the most readily affected industries should natural gas need to be rationed. Industry rationing is now “a plausible scenario for 4Q 2022” in Germany, Jeffries recently noted in research on power utilities.

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