Zurich Insurance estimates that the overall property and casualty (P&C) claims from the COVID-19 pandemic will be in the region of $750 million for 2020.
To put that into context, Zurich’s CFO George Quinn said the expected COVID-19 claim level is similar to the impact of claims the company saw in 2017 from the Hurricanes Harvey, Irma and Maria, although the current estimate is subject to significant uncertainty.
“So this is not especially unusual territory for us in terms of the size of the event,” said Quinn in a teleconference with reporters to discuss the company’s first quarter update. Given the strength of the group’s balance sheet, he added, the company is “well equipped to absorb” the loss, which remains within the group’s risk tolerance.
During the first quarter, $280 million of the overall claims amount for the year thus far has been recognized.
“The impact of claims related to the COVID-19 outbreak and the sharp falls in financial markets in the latter part of the first quarter are expected to remain a 2020 earnings event,” said Quinn in a prepared statement accompanying the update. “Group solvency remains strong and together with the diversity of our business and our conservative balance sheet, I am confident that the group is well placed to manage the current challenges.”
Components of the COVID-19 Claim
The main drivers of the $750 million claims figure are property business interruption (and the loss-of-profits component of that coverage); travel and assistance; accident and health, and, finally, other miscellaneous lines that include workers’ compensation, he explained during the teleconference.
Business interruption represents about 60% of Zurich’s overall COVID-19 payout, while travel is about 25% and accident and health and the rest are around 15%, Quinn continued.
Not included in the overall tally are directors and officers, some smaller liability lines, and credit and surety. This is not because Zurich doesn’t expect claims in these lines “but because we believe that the exposure to these areas are less significant for us, or they’re well protected by reinsurance,” he said.
Most of the overall COVID-19 exposures are in Europe, with a smaller impact from U.S., Latin America and Asia Pacific, he noted.
Business Interruption Debate
Quinn spoke briefly of the business interruption controversy raging in some markets such as the U.S. and UK, where there is a debate about whether a virus constitutes property damage. He said this has been litigated previously “but I guess it will be litigated again.”
He emphasized that Zurich’s wording typically follows the standard form used in the U.S. for business interruption, “and our wording typically includes a virus exclusion.”
“More than 99% of our contracts in North America will have that wording.”
As a result, Quinn continued, Zurich doesn’t have “a significant concern that there will be an ability to force our contracts to respond” because the language used is very clear. He expressed confidence over the company’s COVID-19 claims estimate for the year.
On a positive note, the company also is seeing a reduction in claims frequency in some lines of business, such as auto where there have been fewer accidents as a result of the lockdown. “We haven’t incorporated any assumption yet for a benefit from that frequency reduction,” said Quinn.
During the first quarter, Zurich said it had a “solid top-line performance” with Property & Casualty (P&C) gross written premiums up 7% from the same quarter last year, driven by growth from EMEA and North America
Topics Claims Property Casualty COVID-19
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