4 ms·

What sort of effect will this have on contracts that have Force Majeure clauses? That's a big unknown to me that could have a big recessionary effect.

toomuchtodo 7y ago
I think there's going to be so much nuance around this (what does your contract say? when did you sign it? do you have insurers backstopping you? if so, what does their policy say?) that the answer is going to be, "Talk to your lawyer". Personal opinion, not a lawyer, not your lawyer, is that the further into the global pandemic we were when executing an agreement, the less wiggle room you might have. Again, talk to your lawyer; that's what they get paid for.
Hongwei 7y ago
Somewhat related - pandemic bonds will now pay out towards relief efforts and investors will lose their money. Matt Levine does some analysis here: https://www.bloomberg.com/opinion/articles/2020-02-19/the-fintechs-are-banks-now https://www.bloomberg.com/opinion/articles/2020-02-19/the-fi...
- alexpotato 7y ago
  Interesting history on catastrophe bonds in general: https://www.nytimes.com/2007/08/26/magazine/26neworleans-t.html https://www.nytimes.com/2007/08/26/magazine/26neworleans-t.h...
deleted 7y ago
[deleted]
ac29 7y ago
I share an office with a travel agent, and I can tell you a lot of people with "cancel for any reason" travel insurance are getting screwed by force majeure clauses. Unsurprisingly, insurance companies have no interest in paying out policies that threaten the existence of their company.
- jennyyang 7y ago
  That sounds like a great way to kill the travel insurance industry. Not paying out means that the same people won't buy it again next time.
  - exhilaration 7y ago
    Oh there's more than enough suckers out there to make travel insurance profitable forever.
PeterisP 7y ago
It's exactly what force majeure clauses are for. If something gets cancelled or becomes unreasonable because of Covid-19, this gives a reasonable way to exit contracts without penalties, and that is a good thing because given very unusual circumstances, we want people and organizations to be able to adapt instead of being pressured financially to execute things that seemed reasonable last year but are not now. The first area where I'm seeing widespread uses of force majeure clauses is the cancellation of large events, conferences etc with limited or compensation for the cancellations. And again, while this hurts some people a lot, this is mostly a good thing, because we do want to give the organizers the ability to break their commitments and cancel the conference with much smaller consequences (to them) than an ordinary cancellation would have; we don't want the organizers to be pressured to hold the event at all costs.

toomuchtodo 7y ago

I think there's going to be so much nuance around this (what does your contract say? when did you sign it? do you have insurers backstopping you? if so, what does their policy say?) that the answer is going to be, "Talk to your lawyer". Personal opinion, not a lawyer, not your lawyer, is that the further into the global pandemic we were when executing an agreement, the less wiggle room you might have. Again, talk to your lawyer; that's what they get paid for.

Hongwei 7y ago

Somewhat related - pandemic bonds will now pay out towards relief efforts and investors will lose their money. Matt Levine does some analysis here: https://www.bloomberg.com/opinion/articles/2020-02-19/the-fintechs-are-banks-now https://www.bloomberg.com/opinion/articles/2020-02-19/the-fi...

alexpotato 7y ago
Interesting history on catastrophe bonds in general: https://www.nytimes.com/2007/08/26/magazine/26neworleans-t.html https://www.nytimes.com/2007/08/26/magazine/26neworleans-t.h...

deleted 7y ago

[deleted]

ac29 7y ago

I share an office with a travel agent, and I can tell you a lot of people with "cancel for any reason" travel insurance are getting screwed by force majeure clauses. Unsurprisingly, insurance companies have no interest in paying out policies that threaten the existence of their company.

jennyyang 7y ago
That sounds like a great way to kill the travel insurance industry. Not paying out means that the same people won't buy it again next time.
- exhilaration 7y ago
  Oh there's more than enough suckers out there to make travel insurance profitable forever.

PeterisP 7y ago

It's exactly what force majeure clauses are for. If something gets cancelled or becomes unreasonable because of Covid-19, this gives a reasonable way to exit contracts without penalties, and that is a good thing because given very unusual circumstances, we want people and organizations to be able to adapt instead of being pressured financially to execute things that seemed reasonable last year but are not now. The first area where I'm seeing widespread uses of force majeure clauses is the cancellation of large events, conferences etc with limited or compensation for the cancellations. And again, while this hurts some people a lot, this is mostly a good thing, because we do want to give the organizers the ability to break their commitments and cancel the conference with much smaller consequences (to them) than an ordinary cancellation would have; we don't want the organizers to be pressured to hold the event at all costs.