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Industry capital backing U.S. insurers and reinsurers writing business interruption (BI) insurance could decline by as much as 50per cent on an after-tax basis if legislated policy changes force carriers to pay for two months of retroactive coverage on COVID-19-related BI claims, according to new analysis by AM Best.
A new Best’s Commentary, “Legislation Aimed at Nullifying BI Exclusions an Existential Threat to P/C Insurers,” estimates that approximately $633 billion of U.S. (re)insurance companies’ surplus is exposed to BI losses. Per AM Best’s calculations, the impact of legislation would lead to estimated monthly BI losses of $150-$200 billion for businesses with fewer than 100 employees. As a result, a closure of two months would result in a projected after-tax capital and surplus loss of 37-50%. AM Best’s total BI exposure estimate is based on the combined surplus of commercial lines insurers and reinsurers that have exposure to commercial multiperil or property lines, and personal lines insurers that also underwrite commercial multiperil exposures