Hospitality insurance: Supporting a hard-hit industry’s post-pandemic recovery

For the hospitality industry, the past three years have been a bumpy, unpleasant ride of lockdown closures and profit losses. As Canadians return to gathering in beloved restaurants, bars and other venues, the sector has made a gradual comeback. One Canadian managing general agent (MGA) is vocal about supporting that recovery.

“We do everything from pubs to nightclubs and smaller take-out establishments. We’ve seen the full range of hospitality across Canada,” said Christopher Fennell (pictured), senior underwriter for Agile Insurance Solutions. “The traditional policy includes commercial general liability, property, business interruption, crime, boiler and machinery coverage (production machinery), data beach, products recall and legal expense.”

Pubs, restaurants, and nightclubs were some of the heaviest-hit sectors by COVID-19, and commercial food and beverage insureds continue to face economic obstacles, including persistent supply chain interruptions and staffing shortages. They also continue to pay the increased costs of complying with pandemic health and safety measures.

“While other sectors of the economy have recovered majority of their pandemic losses and returned to or surpassed their pre-pandemic level of operations, at least 13,000 foodservice establishments have permanently shut down since the start of the COVID-19 crisis,” Fennell said.

Even before COVID-19 drew the shutters over restaurants and bars across Canada, hospitality risks had been hard to place for some time. Many insurers find the industry more risky and less profitable than others.

In 2020, the Toronto Insurance Council highlighted the hazards posed by inebriated customers in food and beverage establishments, as industry players either hiked premiums or withdrew from the market. Those hard conditions were only worsened by the pandemic, as insurers viewed hospitality businesses as significant contributors to the spread of the coronavirus.

“Canada’s social distancing regulations basically cut the customer base in half, or even more for some clients,” Fennell shared. He noted that many businesses successfully shifted to take-away and delivery services to keep sales afloat.

“Retail sales offered a way to offset some of their lost revenue, but a lot of these restaurants weren’t familiar with how to shift to this new business model. We tried to support and guide them through those big changes to help them minimize their losses,” he continued.

Agile Underwriting Solutions remained flexible and worked with its clients in the hospitality space to help them cope with the crisis. Key to this support was reducing costs for the already-beleaguered industry. “When everything fully shut down, we were able to adjust how much to charge [clients],” Fennell shared. “We pivoted quickly for our clients and reduce their premiums from the liability side, accounting for the reduced exposure of having customers consume [products] on site, which helped our clients save some cost.”

Hospitality’s road to recovery will be a long one. Fennell noted that many businesses would need continued government support to return to their pre-pandemic levels of business.

“Craft breweries are among the businesses that have bounced back the fastest because they already have some retail infrastructure in place, which they were able to tap into when the pandemic hit,” he observed. “Unlike nightclubs and entertainment venues, which have had a slower recovery due to their revenue being based on the volume of people entering their establishments.”

For Fennell, the hospitality industry is critical not just to Canada’s economy, but also to its social fabric. “[As an industry], we need to support them and help them along with any best practices and regulations that may come into play. We want to make sure they are covered,” he said.

Fennell is passionate about the food and beverage space. “It’s an industry I’m really drawn to because it’s social. There’s so many great craft breweries and licensed liquor establishments here that showcase Canadian products. Every small town seems to have something unique, and it’s interesting and fun to learn about that.”

Pent-up demand for dining out has already given the hospitality industry a boost this year. According to the Toronto-based NPD Group, restaurants visits in Q2 2022 are up 17% compared to the year before – only 2% below pre-pandemic levels. Customer spending has also grown by 30% from prior-year figures, signalling that recovery is headed in the right direction.

Restaurants, pubs, bars, and nightclubs make up a lively industry that, although high-risk, relies on insurance to be financially viable. “I think it’s an important industry for bringing people together, especially after the pandemic,” Fennell said. “As a sector of professionally trained staff serving customers from across the country and around the world, the hospitality industry provides an ideal setting for showcasing Canadian-made products.”