The potential impact of the Coronavirus on insurer AIG appears to be fairly low despite the company’s considerable exposure to pandemic risk and its high share in the Chinese P&C market, according to Credit Suisse.
A visualization of the SARS virus. Source: 3D4MEDICAL
However, analysts cautioned that they were “not highly confident” in their assessment, given AIG’s evolving global P&C coverages, including written and ceded reinsurance programs and specialty lines.
AIG lists pandemics as one of its catastrophe-related risks for General Insurance, as well as a risk for Life & Retirement.
Credit Suisse noted that AIG could be exposed to some business interruption losses if the virus ends up interrupting US and non-US airlines, lodging, cruise lines, and other businesses involving travel.
The Coronavirus has infected almost 6,000 people since first being identified by the World Health Organisation (WHO) on December 31st.
The vast majority of cases are in China, particularly in the city of Wuhan where the virus is though to have originated, with 132 people now thought to have been killed.
Currently, no deaths have been recorded outside of China, but the virus has reached as far as the US, France, Australia, Japan, Canada and South Korea, sparking fears of a global crisis.
Based on figures from 2018, AIG controls 20% of the total foreign P&C market share in China and has gross premiums written of 1.6 billion Yuan (~$250 million).
But looking at past examples, AIG did not cite a material impact to its business when the severe acute respiratory syndrome (SARS) virus broke out in China in 2003.
At the time, most related discussion focused on AIG’s aircraft leasing and Asian life businesses, Credit Suisse noted, which have since been divested.
That said, the Coronavirus could yet prove to be a more serious epidemic than SARS, as there have been more confirmed cases of the Coronavirus in China within the first month of its outbreak than there were during the entire SARS crisis.
In total, the SARS outbreak killed more than 770 people, including 349 in mainland China, over a period of roughly six months.
Later, in 2009, AIG estimated that it would incur a $600 million pre-tax loss for a recurrence of the flu pandemic of 1968, which killed about 1 million people worldwide. This was following the breakout of the H1N1 influenza virus (swine flu).
