Foot-and-Mouth Crisis Unlikely to Impact Insurers

March 28, 2001

Most analysts have concluded that no serious insured losses will be caused by the current foot-and-mouth epidemic in Britain and Europe, despite the enormous economic losses. In the U.K., where the disease first appeared, over 600 farms have been affected, and losses are estimated to exceed £9 billion ($13 billion). So far no containment is in sight.

Insurers, however, apparently have little exposure to economic farming losses. A bulletin from Standard & Poor’s stated, “With the Government libel to pay compensation to farmers whose livestock has been destroyed, the ratings agency believes the only negative for the insurance industry will be claims for interrupted business.”

Sporting events have been the most seriously affected activity. Many, including the Cheltenham race meeting and several international rugby matches, have been canceled. Britain’s tourist industry, especially in rural areas, has also seen a significant drop in business.

S&P estimates that the total impact on insurers would be around £50 million ($72.5 million), but it warned that as the crisis deepens, more serious economic losses could trigger a rise in claims, and that ultimately the entire economy could be adversely affected.

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