By Anoop Khanna
General insurance industry losses due to COVID-19 could surpass the claims from the World Trade Center attacks in 2001. A report by Willis Towers Watson (WTW) released on 1 May 2020 estimates the general insurance losses due to COVID-19 in the US and UK alone to be between $32bn and $80bn.
According to a press report by Reuters, the WTW report ‘Scenario Analysis of the COVID-19 Pandemic’ has based its estimates on US and UK business interruption, contingency, US directors and officers, US employment practices, liability, US general liability, US mortgage, trade credit and surety and US workers’ compensation.
According to a press report by Reuters, the WTW report ‘Scenario Analysis of the COVID-19 Pandemic’ has based its estimates on US and UK business interruption, contingency, US directors and officers, US employment practices, liability, US general liability, US mortgage, trade credit and surety and US workers’ compensation.
The WTW report, however, said, “This report has been prepared in order to provide a framework for (re)insurers to be able to assess relative impacts by the line and geography. Whilst this focusses on selected high impact lines in the US and the UK, this framework can be extended to other classes and geographies as required.”
An ‘optimistic’ scenario or a return to a pre-COVID-19 state following three months of social distancing, would mean $11bn of insured losses, while a ‘moderate’ scenario, a gradual return following six months of social distancing, would mean a bill of $32bn to insurers.
Social distancing for a year under a ‘severe’ scenario – a health impact approaching the scale of the 1918 flu pandemic – will mean $80bn in COVID-19 insured losses, the report said. The report also provides an extreme pandemic scenario, which could result in $140bn of losses.
The Reuters report quotes Willis global leader (insurance consulting and technology) Alice Underwood, “Beyond its devastating human cost, the COVID-19 pandemic has swiftly upended economic activity around the world.”
She said, “At this point, it appears that the industrywide level of general insurance loss could exceed that resulting from the 2001 World Trade Center event.
“Given the potential scale and systemic nature of pandemic loss, talks about the need for some sort of government backstop to address future pandemic risks have already begun.”
Asia Insurance Review
