By Ahmad Zaki
Analysts from investment bank UBS have added 50% to their estimate for the eventual insurance and reinsurance industry loss from the COVID-19 pandemic, now in the range of $30bn to $60bn.
The bank initially estimated losses of around $22bn and $42bn, across both insurance and reinsurance. However, with the new understanding that BI claims will have a bigger impact outside of the US, they have raised their estimates. Their estimates for non-US BI losses went from the $5bn to $15bn range to the $7bn to $22bn range.
In certain regions of Europe, BI policies are not as strongly worded as in the US, and also lack exclusion clauses; this might drive more claims through to insurers.
Earlier last week, analysts at Dowling & Partners provided their loss estimate figures for P&C lines at a range of $40bn to $80bn. These estimates are based on the assumption that insurers will not have to pay retroactive claims for BI policies; however, the courts might also get involved, which means that the actual loss figures cannot be calculated until the claims are settled.
It will take years for the courts to settle claims, which means that the coronavirus could have a long-tail for the reinsurance industry, which will affect ILS exposure, given the potential for collateral to be trapped for long periods.
Dowling’s analysts caution on reading too much into reported losses at this time, as they are all likely to significantly understate the true impacts as there is so much uncertainty associated with the claims load at this time.
Dowling’s regional estimates for the P&C industry loss are: $5bn to $15bn in the U.S.; $5bn to $10bn in the UK; $5bn to $10bn in Europe; $2bn to $10bn for other property related lines and regions.
Liability lines are estimated at $5bn to $15bn and other specialty lines of insurance business could take $17bn to $40bn of the loss, with another up to $5bn set aside for any unexpected losses that flow through the industry.
Asia Insurance Review