Analysts at research firm Dowling & Partners believe the property and casualty insurance industry should expect between a $40 billion and $80 billion loss from the coronavirus pandemic.
If insurance losses were to hit the upper limit of this estimate, the reinsurance industry could expect to pay out a double-digit billion dollar figure.
Dowling & Partners has based their estimate on a range of assumptions, primarily that P&C insurers will not be forced to take a massive claims load from retroactive business interruption.
Furthermore, analysts have assumed that the US courts will get heavily involved and legal action could take years to settle, meaning a true ultimate industry loss for COVID-19 will be impossible to come to until claims settle.
It’s also assumed that exposure to poor wordings is likely to be higher outside the US than within it, which Dowling’s analysts believe will result in greater reinsurance exposure.
Dowling & Partners believes reinsurers could take as much as 40% to 60% of the loss in regions where wording issues means more of the industry total falls to them.
They also have stated that, as it could take years for claims to make their way through the courts, there will be a significant challenge in coming to a finalised industry loss for the pandemic.
As a result, COVID-19 could have a particularly long-tail for the reinsurance industry, and litigation risk could become a real issue for some as the pandemic progresses.
Dowling’s analysts underline the importance of not reading too much into reported losses at this time, as they are all likely to significantly understate the true impacts due to there being significant uncertainty associated with the claims load at this time.