Experts have said that global companies are expected to be faced with billions of dollars of losses as a result of disruptions caused by the new coronavirus in China, reports Reuters.
The large majority of insurance claims from the new coronavirus in China are expected to be from businesses, most notably travel companies and hospitality and event firms.
However, experts have told Reuters that epidemics are usually excluded from standard insurance policies, suggesting that many international companies will have to front the costs themselves.
Of course, some global firms will have purchased insurance protection for damages and disruptions caused by an epidemic, but the majority of standard policies exclude things of this nature in order to keep the cost down.
Following initial reports and commentary surrounding the event, it’s becoming clearer that there’s a real lack of coverage for epidemic and outbreak related business interruption.
Reuters reports that according to industry insiders, previous viruses, such as SARS and Ebola, have pushed insurers to add specific exclusions to the majority of basic covers. Furthermore, experts from the insurance industry also told Reuters that most event cancellation policies would also not cover the new virus.
The death toll from the virus currently stands at 132 in China, with new cases being reported around the world on a daily basis. The virus started in Wuhan, which is now in a state of lockdown while companies and airlines from around the world are stopping travel to China in an effort to stem the spread of the virus.
Analysts at Wells Fargo Securities have commented on the virus and the implications for the insurance and reinsurance industry.
The firm notes that in the event of a pandemic event, life reinsurers should have the most exposure, followed primary life players, P&C insurers and then insurance brokers.
For life reinsurers, analysts note potential exposure to mortality shock risk if the virus continues to spread, with SCOR, RGA, Swiss Re, Hannover Re, and Munich Re the most exposed.
While life insurers do have exposure, analysts note that this is mostly through joint ventures. Importantly, analysts do not expect that any of these joint venture firms have more than a 1% market share, adding that they do not believe that any of these joint ventures are near Wuhan.
For P&C insurance companies the risk is lower still and Wells Fargo Securities says that while they do not have any direct mortality exposure to the virus, they might face some exposure were the virus to result in a severe economic slowdown.
“From a P&C claims perspective, we could see some businesses in China suspend operations, which could lead to a rise in supply chain or business interruption claims. Furthermore, some policies have pollution or other exclusions that could extend to include the virus,” say analysts.
