The Lloyd’s Market Association said the clause, which is optional and can be added to contracts if all parties agree, would ensure companies do not become uninsured if Lloyd’s of London faces significant disruption from the pandemic.
The wording comes as Lloyd’s tests on Friday its “emergency trading protocol,” closing its four-floor underwriting department for the first time and encouraging brokers to place business either through electronic trading systems or via email.
The policy wording would ensure customers’ policy coverage continues beyond a renewal date “if the Lloyd’s market is inaccessible, and emergency trading protocol fails,” the body said.
“Although the situation specified is extremely unlikely to occur, the LMA and its members felt it prudent to draft this model clause to ensure that Lloyd’s customers are not left without coverage should the coronavirus, or any other event, prevent renewal negotiations from taking place,” Patrick Davison, deputy director of underwriting, said.
The additional terms and conditions can be dropped wholesale or in an amended form into existing contracts by mutual agreement between insurers, customers and reinsurers.
The wording offers an additional 14 days of cover from the end of the policy expiration date, if access to the Lloyd’s building is blocked and the emergency trading protocol fails.
It comes as Lloyd’s closed all underwriting floors for 24 hours until Friday midnight, while insurers and brokers tested placing all business over the e-trading system, Placing Platform Ltd., or via email.
Lloyd’s said the measures would allow it to gain “valuable information on the real-life effectiveness” of its emergency trading protocol. “Relevant regulators have been informed of these plans,” a spokesman added.
--Editing by Tom Mudd.
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