COVID-19 and captive insurance

COVID-19 has been presenting significant challenges for U.S. businesses across every industry, and community banks have had to respond to some unique circumstances. Most banks’ commercial policies exclude coverage for pandemics. A captive can be designed to complement a community bank’s commercial insurance program, providing coverage where the commercial policies leave off or have numerous exclusions.

KeyState has started to receive COVID-19-related claims from the banks in our Bank Captive Program. Examples of these claims are outlined below:

• Expenses related to the purchase or lease of computers and equipment for employees to work from home (of which the captive will reimburse the bank for a portion while in use during the pandemic).
• Expenses related to deep cleaning of branches or facilities that have had exposure to COVID-19.
• Costs associated with installing plexiglass barriers for tellers in bank branches.
• Expenses associated with the purchase of personal protective equipment to keep their employees and customers safe through the pandemic.

In addition to these claims, banks across the nation are facing other headwinds that a captive insurance company can help to address:

• Double-digit increases in their commercial insurance rates while being forced to take on higher deductibles. A captive can insure the additional risk that the bank takes on with the higher deductible.
• Potential cyber and crime losses — Banks are also faced with increased potential for cyber and crime losses with the new work-from-home environment. This presents an entirely new level of scrutiny by commercial carriers with additional costs and exclusions.

Since launching the Bank Captive Program in 2012, KeyState has had 85 banks join the program and has been endorsed by 27 state banking associations, including TBA.

David Guerino
[email protected]
802-233-2624