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Hayes Parsons Insurance Brokers on assessing risk and financial viability
In the last AIM Bulletin, we provided commentary on the suggested approach to risk assessments and decision making rationale for
reopening, we now concentrate on looking further forward.
Checklist Step 2 – Assess risk
As part of any updated risk assessment, social distancing measures need to be in place for staff, volunteers and visitors. At 2m, or even reduced to 1m, it may not be viable for many smaller museums to open in the near term – there simply isn’t the space, meaning it is likely the museum will be unoccupied for an extended period of time.
From the start of lockdown, insurers in the main have waived their usual unoccupancy terms. They have not restricted the cover provided for being closed, nor have they enforced the conditions that would apply to premises not being used, such as increased inspections and utilities turned off. This stance is now being revisited and insurers are looking to apply standard policy terms and conditions.
You should speak to your insurance provider now to outline the museum’s plans, to ensure you are aware of any restrictions that may apply or additional obligations. We expect insurers to be accommodating if you detail your approach to reopening, including facilities management and on-site presence, but communication is paramount. If you continue to be closed and insurers are not aware of your plans, they can legitimately apply their standard policy terms without consultation, which may result in some cover being removed, perhaps leaving you with little more than fire cover.
Checklist Step 3 – Financial viability
Boards of directors or trustees are also under the spotlight as financial pressures mount. Their personal accountability is insured through Directors and Officers/ Trustees Liability insurance. Ordinarily, this insurance is done through assumptions on the financial position and processes of the museum, via a statement of fact. The reality is that some museums are now struggling financially, and there needs to be serious discussions as to how to maintain financial viability.
Museums with higher overheads and little prospect of generating income in the near term are more likely to face difficult decisions, or even the real risk of collapse, and this increases the likelihood of those managing the museum being asked questions about their approach and decision making – which in turn leads to an increase in the potential likelihood of claims being brought.
You should expect insurers who provide this cover to ask more questions about current and forecasted financial impact, debt and liquidity issues and changing activities (including business continuity planning) as well as staffing restructures and redundancies.
The insurance industry is going through change, which will undoubtedly impact your insurance renewal. As part of your overall impact assessment you should get a second opinion on your insurances, including what the museum has covered, and to what extent, as well as a thorough price review.
Ben Leah, Director
Hayes Parsons Insurance Brokers
Hayes Parsons Insurance Brokers are working closely with AIM to support members through the reopening process. They specialise in
insurance for museums, visitor attractions and heritage properties. Please get in touch with the Hayes Parsons team on email@example.com if you have need any insurance or risk management help.