David A. Sampson, President and CEO of the American Property Casualty Insurance Association (APCIA), has warned that industry solvency could be at risk if insurers are forced to pay COVID-19 claims that are not covered by current contracts.
He noted that standard event cancellation insurance policies do not include communicable disease coverage such as COVID-19 (also known as coronavirus).
“While consumers typically have the option to purchase broader coverage through special endorsements, that exposure only represents a small fraction of insurers’ surplus,” Sampson explained.
But as social distancing becomes more widely practiced around the world to slow the spread of the virus, more and more major events are being cancelled or postponed, and this is putting a spotlight on insurers.
This could result in insurers being forced to pay out on policies even if they specifically exclude communicable disease claims.
While Sampson expressed concerns about the impact this could have on industry solvency, he asserted that the US property-casualty market continues to show strong financial stability.
“Insurers’ financial solvency is closely monitored by regulators with a surplus of over $822 billion in the U.S. and $2 trillion globally,” Sampson said.
He added: “Insurers also have extensive emergency continuity plans they are implementing to continue providing services effectively during times of crisis.”
The APCIA is the primary national trade association for home, auto, and business insurers, which aims to protect the viability of private competition for consumers and insurers.