Are you covered? Insolvency insurance and COVID-19
What is the insurance risk for receivers and liquidators in the busy months ahead? Brought to you by Crombie Lockwood.
With many New Zealand firms facing tough times as COVID-19 support stimulus is wound back, insolvency practitioners are likely to see a spike in activity in coming months. It’s why now is an ideal time for licensed insolvency practitioners to consider insolvency and turnaround insurance to guard against risks when appointed as receivers or liquidators.
Crombie Lockwood insurance brokers has developed a suite of unique solutions that assist insolvency practitioners to identify exposures and recommend ways to avoid, manage, minimise risk, and arrange cover for insolvency appointments.
Automatic cover on day one
“Insolvency practitioners have their own set of issues when they’re appointed as a receiver or as a liquidator because that may or may not invalidate any insurance that’s in place,” explains Greg Powell, Executive Broker & Technical Manager, Crombie Lockwood.
“With our product, practitioners have automatic cover on day one. That will cover the assets they’re in control of as well as liabilities for whatever business they control – whether they’re trading or not trading.”
Powell says it makes good sense for practitioners to consider such insurance as the pressure that struggling business operators are experiencing can impact non-disclosure obligations.
According to Powell, the potential problem here is that by the time a receiver or liquidator is appointed, an insurance policy “may already be compromised by non-disclosure”.
“What we often find is that when companies are under stress they may have already compromised the insurance policy that’s in place and that can affect
the receiver or appointee when they go to make a claim.
“The practitioner might have done everything right, but the previous directors may not have disclosed something that has invalidated the insurance and then the insurance doesn’t pay. That’s not uncommon.”
Peace of mind for practitioners
It’s why insolvency and turnaround insurance can provide New Zealand practitioners with peace of mind, particularly in high stakes – and fast-moving – liquidation and receivership scenarios, such as those we experience these days.
Whether a practitioner is dealing with a low-risk business like a retail store or a higher-risk enterprise such as a sawmill, Powell says that insurance and turnaround insurance can assist.
“Let’s say you’re appointed as a receiver or liquidator on Friday afternoon by the bank and you don’t know whether there’s any insurance in place on the stock that’s in a number of retail stores. With us, within the terms of our agreement, the practitioner will know that they have certain automatic cover in place,” he explains.
“That means they can go home on Friday night and feel comfortable that they have insurance in place.”
A streamlined process
Engaging with Crombie Lockwood is also a simple and easy process for practitioners, no matter where they are in New Zealand.
Practitioners simply access an online portal via the Crombie Lockwood website where they fill out basic details and can “log the appointment”.
“We know straight away what a practitioner has been appointed to and can work through what the requirements are regarding their particular needs immediately,” says Powell.
He adds that it’s all part of making the process as seamless as possible for insolvency experts whose skills will be in increasing demand as COVID-19 plays out.
“There’s certainly lots of work coming down the pipe next year,” he says.
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