Moody’s is expecting insurers in the UK, France and Germany to face only moderate business interruption claims as a result of the coronavirus outbreak, as pandemic-related claims are excluded from most business interruption policies in all three countries.
This follows a statement from the Association of British Insurers which explained that business interruption insurance typically covers firms only against closure due to physical damage, and that “the vast majority” of them will not have purchased policies that compensate them for forced closure.
The ABI statement came shortly after the UK government said its recommendation that people avoid pubs, cafes and theatres in order to slow the spread of the virus would be sufficient to trigger business interruption claims for those companies that have the necessary insurance cover in place.
Similar restrictions on the leisure and hospitality sectors are in force in France, Germany, and other European countries.
Moody’s says most major insurers operating in the UK market, including Allianz, AXA, Aviva, Lloyd’s of London and RSA provide business interruption cover.
According to the ABI, only a “very small minority” of businesses may have bought additional protection against closures due to infectious disease, and an even smaller number will have cover enabling them to potentially claim against the coronavirus pandemic, depending on the terms and conditions of their policies.
In France, most insurers are similarly under no contractual obligation to cover business interruption costs triggered by pandemic events.
According to the Federation Francaise de l’Assurance, France’s insurance industry association, “almost all” commercial insurance policies exclude claims due to epidemics.
However, the French government has said it is in talks with insurers to identify ways in which they can support the corporate sector as part of a national solidarity effort against the coronavirus outbreak.
In Germany, business interruption policies generally only cover damage caused by fire, theft, or natural hazards such as storms, according to the Gesamtverband der Deutschen Versicherungswirtschaft (GDV), the country’s insurance industry body.
While companies can buy additional protection against communicable diseases, few have done so, the GDV said.
While insurance companies‘ direct claims exposure may be limited, Moody’s believes the sector as a whole faces the risk of reputational damage in the event of widespread non-payment of business interruption claims related to the coronavirus outbreak, as some policyholders may not be aware that infectious diseases were excluded.