Currently, the ongoing coronavirus outbreak is not expected to have a meaningful adverse impact on the financial results of U.S. property/casualty (P/C) companies, nor their ratings, according to Fitch.
The financial services ratings agency has said that a combination of the nature of insured commercial exposures and restrictive language embedded in policies, will most likely mitigate the level of claims that P/C firms experience from the outbreak.
So far, almost 90,000 cases have been confirmed around the world and more than 3,000 deaths as the virus continues to spread at a rapid pace.
According to Fitch, for U.S. P/C companies, the most notable and immediate financial impact will be fluctuations in capital levels for firms with large common stock holding.
The reality of the matter is that P/C solutions offer protection against damage to physical objects and also liability-related risks, but have limited direct exposure to claims related to a pandemic. As noted by Fitch, areas more likely to have a direct exposure include travel insurance and cancellation policies, although wording here can exclude pandemic events.
“The risk of pandemic-related claims could derive within business interruption insurance or contingent business interruption policies,” notes Fitch, but again adds that policy wording might limit the exposure here also.
One area of the insurance arena that may have losses from the event, although as with other lines of business it is still too early to tell, is event cancellation, says Fitch.
“The scope of risk under liability policies is harder to predict, but could include the case in which a company experiences some outbreaks among its workers, and is sued on the view that it failed to take adequate or reasonable steps to protect its other workers,” adds Fitch.
Financial services ratings agency Moody’s also commented on the outbreak today, noting that global insurers and reinsurers have both direct and indirect exposure.
Re/insurers are exposed directly through a potential spike in claims, and indirectly through the impact on economic growth and the subsequent financial market volatility, says Moody’s.
Brandan Holmes, a Vice President, Senior Credit Officer at Moody’s, commented: “European insurers’ Solvency II ratios are particularly sensitive to financial market volatility and movements in bond yields and credit spreads.
“Sharp deterioration in financial markets over the past week will weigh on insurers’ profitability and capitalisation.”