Strain on General Insurer - Covid-19 Pandemic

Insurance broker Willis Towers Watson today estimated general insurance losses between US$32 billion (RM138 billion) and US$80 billion across key classes in the United States and UK from the novel coronavirus, surpassing claims from the 9/11 attacks.

A report by the broker showed early estimates for US and UK business interruption, contingency, US Directors & Officers, US employment practices, liability, US general liability, US mortgage, trade credit and surety and US workers’ compensation.

An “optimistic” scenario or a return to a pre-Covid-19 state following three months of social distancing, would mean US$11 billion of insured losses, while a “moderate” scenario, a gradual return following six months of social distancing, would mean a bill of US$32 billion to insurers.

Social distancing for a year under a “severe” scenario — a health impact approaching the scale of the 1918 flu pandemic — will mean US$80 billion in Covid-19 insured losses, Willis said.

Willis also said it has modelled an extreme pandemic scenario, which could result in US$140 billion of losses.

“Beyond its devastating human cost, the Covid-19 pandemic has swiftly upended economic activity around the world,” said Alice Underwood, global leader, insurance consulting and technology, at Willis.

“At this point, it appears that the industry-wide level of general insurance loss could exceed that resulting from the 2001 World Trade Centre 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, Underwood said.