Category Archives: Insurers and the Economy

Business Insurance, Business Risk, Catastrophes, Disaster Preparedness, Disaster Resilience, Floods, Insurers and the Economy, Legal Environment

Policyholder Surplus Matters: Here’s Why

September 14, 2020 Jeff Dunsavage Leave a comment

Perhaps the most emotionally compelling data point invoked by those who would compel insurers – through litigation and legislation – to pay business-interruption claims explicitly excluded from the policies they wrote is the property/casualty insurance industry’s nearly $800 billion policyholder surplus.

Many Americans hear “surplus” and think of a bit of cash they have stashed away for emergencies. And when you consider that nearly 40 percent of Americans surveyed by the Federal Reserve said they would either have to borrow or sell something to cover an unexpected $400 expense – or couldn’t pay it at all – that number may sound like overkill.

Not as much as you think

But policyholder surplus isn’t a “rainy day fund.” It’s an essential part of the industry’s ability to keep the promises it makes to policyholders. And although a number like $800 billion may raise eyebrows, when we look more closely at its components, the amount available to cover claims turns out to be considerably less.

Insurers are regulated on a state-by-state basis. Regulators require them to hold a certain amount in reserve to pay claims based on each insurer’s own risk profile. The aggregation of these reserves – required by every state for every insurer doing business in those states – accounts for about half the oft-cited industry surplus.

Call it $400 billion, for simplicity’s sake.

Each company’s regulator-required surplus can be thought of as that company’s “running on empty” mark – the point at which alarms go off and regulators start talking about requiring it to set even more aside to make sure no policyholders are left in a lurch.

By extension, $400 billion is where alarms begin going off for the entire industry.

It gets worse – or better, depending on your perspective.

In addition to state regulators’ requirements, the private rating agencies that gauge insurers’ financial strength and claims-paying ability don’t want to see reserves get anywhere near “Empty.” To get a strong rating from A.M. Best, Fitch, S&P, or Moody’s, insurers have to keep even more in reserve.

Why do private agency ratings matter? Consumers and businesses use them to determine what insurer they’ll buy coverage from. Also, stronger ratings can contribute to lower borrowing expenses, which can help keep insurers’ operating costs – and, in turn, policyholders’ premiums – at reasonable levels.

So, let’s say these additional reserves amount to about $200 billion for the industry. The nearly $800 billion surplus we started with now falls to about $200 billion.

To cover claims by all personal and commercial policyholders in a given year without prompting regulatory and rating agency actions that could drive up insurers’ costs and policyholders’ premiums.

Which brings us to today.

Losses ordinary and extraordinary

In the first quarter of 2020, the industry experienced its largest-ever quarterly decline in surplus, to $771.9 billion. This decline was due, in large part, to declines in stock value related to the economic recession sparked by the coronavirus pandemic.

Nevertheless, the industry remains financially strong, in large part because the bulk of insurers’ investments are in investment-grade corporate and governmental bonds. And it’s a good thing, too, because the conditions underlying that surplus decline preceded an extremely active hurricane season, atypical wildfire activity, and damages related to civil unrest approaching levels not seen since 1992 – involving losses that are not yet reflected in the surplus.

Insured losses from this year’s Hurricane Isaias are estimated in the vicinity of $5 billion. Hurricane Laura’s losses could, by some estimates, be as “small” as $4 billion or as large as $13 billion.

And the Atlantic hurricane season has not yet peaked.

The 2020 wildfire season is off to a horrific start. From January 1 to September 8, 2020, there were 41,051 wildfires, compared with 35,386 in the same period in 2019, according to the National Interagency Fire Center. About 4.7 million acres were burned in the 2020 period, compared with 4.2 million acres in 2019.

In California alone, wildfires have already burned 2.2 million acres in 2020 — more than any year on record. For context, insured losses for California’s November 2018 fires were estimated at more than $11 billion.

And the 2020 wildfire season still has a way to go.

All this is on top of routine claims for property and casualty losses.

Four billion here, 11 billion there – pretty soon we’re talking about “real money,” against available reserves that are far smaller than they at first appear.

No end in sight

Oh, yeah – and the pandemic-fueled recession isn’t expected to reverse any time soon. Economic growth worldwide remains depressed, with nearly every country experiencing declines in gross domestic product (GDP) – the total value of goods and services produced. GDP growth for the world’s 10 largest insurance markets is expected to decrease by 6.99 percent in 2020, compared to Triple-I’s previous estimate of a 4.9 percent decrease.

If insurers were required to pay business-interruption claims they never agreed to cover – and, therefore, didn’t reserve for – the cost to the industry related to small businesses alone could be as high as $383 billion per month.

This would bankrupt the industry, leaving many policyholders uninsured and insurance itself an untenable business proposition.

Fortunately, Americans seem to be beginning to get this. A recent poll by Future of American Insurance and Reinsurance (FAIR) found the majority of Americans believe the federal government should bear the financial responsibility for helping businesses stay afloat during the coronavirus pandemic. Only 16 percent of respondents said insurers should bear the responsibility, and only 8 percent said they believe lawsuits against insurers are the best path for businesses to secure financial relief.

Further Reading:

POLL: GOVERNMENT SHOULD PROVIDE BUSINESS INTERRUPTION SUPPORT

TRIPLE-I GLOBAL OUTLOOK: CONTINUED PRESSURE ON INVESTMENTS & PREMIUMS

BATTLING FIRES, CALIFORNIA ALSO STRUGGLES TO KEEP HOMEOWNERS INSURED

LAURA LOSS ESTIMATES: $4 BILLION TO $13 BILLION

ATYPICAL WILDFIRE ACTIVITY? OF COURSE — IT’S 2020

SWISS RE: A KATRINA-LIKE HURRICANE COULD CAUSE UP TO $200 BILLION IN DAMAGE TODAY

U.K. BUSINESS INTERRUPTION LITIGATION SEEMS UNLIKELY TO AFFECT U.S. INSURERS

RECESSION, PANDEMIC TO IMPACT P/C UNDERWRITING RESULTS, NEW REPORT SHOWS

BUSINESS INTERRUPTION VS. EVENT CANCELLATION: WHAT’S THE BIG DIFFERENCE?

CHUBB CEO SAYS BUSINESS INTERRUPTION POLICIES ARE A GOOD VALUE AND WORK AS THEY SHOULD

TRIPLE-I CHIEF ECONOMIST: P/C INDUSTRY STRONG, DESPITE SURPLUS DROP

INSURED LOSSES DUE TO CIVIL UNREST SEEN NEARING 1992 LEVELS

COVID-19 AND SHIPPING RISK

BUSINESS INTERRUPTION COVERAGE: POLICY LANGUAGE RULES

Industry Financials, Insurers and the Economy

Triple-I Global Outlook: Continued Pressure on Investments & Premiums

September 9, 2020 Jeff Dunsavage Leave a comment

The COVID-19 pandemic continues to depress economic growth around the world, with nearly every country experiencing declines in gross domestic product (GDP) – the total value of goods and services produced. GDP growth for the world’s 10 largest insurance markets is expected to decrease by 6.99 percent in 2020, compared to Triple-I’s previous estimate of a 4.9 percent decrease.

Forward-looking growth proxies, such as interest rates, government spending, equity markets, and commodity prices, are sending mixed to negative messages about growth into 2021.

Against this backdrop, Triple-I experts report, the global insurance industry has continued to issue new policies, service existing ones, and process and pay claims. While the final numbers on the extent of the pandemic and recession’s impact on the industry won’t be clear until 2021-2022, early indicators point to flat premium growth in 2020 globally and to significant differences in how the pandemic, monetary policy, and the recession are affecting insurers in the United States versus abroad.

In its Global Macro and Insurance Outlook for the third quarter, published this week, Triple-I noted that global central banks kept benchmark interest rates mostly on hold in the third quarter at an average of 0.6 percent, reflecting the limits imposed by near-zero interest rates policies.

Concerns about lower long-term interest rates are increasing as global central banks have pushed rates even lower during the pandemic, the report says. In a recent survey, about 33 percent of U.S. insurers said they assume flat long-term benchmark rates, while 50 percent reported having changed, or say they are in the process of changing, their investment strategy. These changes are likely to accelerate now that the U.S. Federal Reserve officially changed the focus of its monetary policy and central banks around the world follow.

Interest rates matter because insurers get the bulk of their profits from investment earnings. U.S. insurers, in particular, rely on fixed-income financial instruments like corporate and government bonds. If lower interest rates put pressure on insurers’ investment earnings, they will have to compensate by raising premiums paid by policyholders or adjusting their risk profiles to reduce claim payouts.

“COVID-19 and lower economic activity continue to hinder premium growth in property, workers compensation, and auto,” the report says, “while a recent survey indicates that COVID-19 led to a reduction in life premium.”

The report says it’s too early to determine whether increasing demand for warranty, indemnity, and cyber coverage and a surge of interest in captive insurers will make up for downward pressure on premium growth across the industry.

Insurance Industry, Insurers and the Economy

Recession, Pandemic to Impact P/C Underwriting Results, New Report Shows

August 13, 2020 Maria Sassian Leave a comment

The COVID-19 pandemic and the recession it started will result in no premium growth for 2020 and a deteriorated combined ratio for the property/casualty industry, according to the new report, Insurance Information Institute (Triple-I) / Milliman P/C Underwriting Projections: 2020-2022.

Direct and net premium written will be virtually unchanged from 2019, while the industry combined ratio, a measure of underwriting profitability, is projected to rise to 102 at year-end, up from 99 last year, according to the report, a joint venture of the Insurance Information Institute and Milliman, a provider of actuarial and related products and services. The report, to be published quarterly, was unveiled on August 13 at an exclusive members only virtual webinar moderated by Triple-I CEO Sean Kevelighan.

“The pandemic and the recession it induced drove down exposures in personal auto and several commercial lines,” said James Lynch, FCAS, senior vice president and chief actuary with the Insurance Information Institute (Triple-I). “Overall premiums are projected to be flat,” said Lynch, adding, “a hard commercial lines market is driving rates higher, which offsets some of the deterioration in exposure.”

“Though there is tremendous uncertainty as to size, the pandemic creates insurance losses that were not contemplated in either catastrophe or attritional pricing,” said Jason Kurtz, FCAS, a principal and consulting actuary at Milliman. “Not surprisingly, pandemic losses can cause underwriting results to deteriorate.”

The report noted that a number of legislative and regulatory proposals have the potential to affect pandemic exposures and losses.

A major hurricane or cumulatively severe wildfire season could also impact the combined ratio, the report noted. Right now, the report projects a typical year for catastrophe losses, though most hurricane prognosticators predict more storms than average.

Other Areas to Watch

Other areas to consider include the impact of the pandemic on workers compensation, particularly the shift in the burden of proof onto the employer for certain types of claimants (i.e. presumption) and the changing exposure from people working from home. Workers compensation saw five consecutive years through 2019 where that line of business posted an underwriting gain; that could change with COVID-19.

Economic trends also play a role. The report assumes that exposures roughly grow and shrink with the economy. If the recovery is slower or faster than projected, premium growth will be affected.

The report is an analysis by Triple-I and Milliman based on an actuarial model that relies on information from a number of publicly available sources as well as input from thought leaders and experts at both organizations. It predicts that premiums will grow 7 percent in 2021 and 6 percent in 2022 as the economy recovers, and the combined ratio will fall to 99 for both years as the industry prices for the effects of the pandemic and the higher rates charged this year earn out.

The complete webinar, available exclusively to Triple-I members, projected underwriting results for several lines of business: personal auto, homeowners, commercial auto, general liability, property, commercial multiperil and workers compensation.

Insurance Industry, Insurers and the Economy

Triple-I: Insurers Poised to Withstand Challenging Economic Times

July 16, 2020 Maria Sassian Leave a comment

The economic uncertainty brought about by COVID-19 has impacted the U.S. insurance industry’s investment portfolios this year yet insurers cumulatively entered 2020 in a strong financial condition, according to a just-released Insurance Information Institute (Triple-I) Economic Snapshot report.

“The good news is the industry is well positioned to provide the safety net we need,” said Dr. Steven Weisbart, Chief Economist and Senior Vice President, Triple-I. “We recognize there’s been deterioration in investment income during the past few months, but the industry was financially strong before the pandemic hit. If a vaccine is discovered, most economists believe the economy will have little trouble bouncing back. Until then, it’s just going to be a longer process than we originally thought.”

The financial fortunes of the U.S.’s property/casualty (P/C) insurers are generally tied to the U.S.’s Gross Domestic Product (GDP) as auto, home, and business (e.g., construction, workers compensation (w/c)) activity are reflective of the economy’s overall health.

Weisbart says while a combination of government restrictions and personal fear is delaying economic recovery, the insurance industry has been able to provide some relief and flexibility for its private-passenger auto insurance policyholders. More than $14 billion in premium relief had been offered to the nation’s drivers in 2020 as of the end of May, a Triple-I analysis found, and insurers continue to monitor the claims experience of motorists.

The Triple-I report shows some additional positive news for insurers. For example, during the past four years the number of owner-occupied homes has risen following a decade during which there was no increase. This is significant for the P/C insurance industry because virtually every owner-occupied home has homeowners insurance while only about half of renters buy renters insurance.

Pandemic-related changes may also affect workers compensation insurance as some states consider changes to the way w/c claims are processed for front-line workers, such as those in health care and law enforcement. On the other hand, some economists suggest w/c claims may experience a decrease due to the number of people working from home.

The Economic Snapshot’s special topic section focuses on life insurance. Although this sector generated its largest pre-tax operating loss of any quarter in at least 18 years, deaths due to the COVID-19 virus weren’t responsible. Instead, the plunge in interest rates was so steep and is expected to last so long that the industry booked an unprecedented increase in aggregate reserves. Reserves rose to $103.5 billion—a $57 billion increase since the third quarter of 2019.

A copy of the 2Q 2020 P/C Industry Economic Snapshot is available to Triple-I members by logging into the members-only portal at www.iii.org. Please contact members@iii.org for log in instructions, or information about membership.

Business Insurance, Health & Safety, Insurers and the Economy, Legal Environment, Workers Compensation

Gauging Pandemic’s Impact on Insurers

June 30, 2020 Jeff Dunsavage Leave a comment

While COVID-19’s impact on the insurance industry will require time to fully understand, litigation, legislation, and concerns about pricing and policy language will be with us for some time to come.

“Significant” changes in policy language seen

The majority of respondents to an Artemis re/insurance market survey believe the COVID-19 pandemic will result in “significant changes” to business interruption (BI) policy wordings.

In fact, the U.K. Financial Conduct Authority (FCA) is conducting a review focused on obtaining legal clarity on policies connected to the pandemic and which claims are valid and which aren’t.

FCA’s Interim CEO Chris Woolard said recently that while some BI policies are paying out for virus-related issues, others remain “within dispute” due to ambiguities in their wordings.

Outside of the 67.6% who stated a belief that COVID-19 will drive “significant changes” in BI policy wordings, 21.6% expect a “moderate amount” of change, while the remaining 10.8% said the effect will be “limited.”

Loss estimates vary

The Artemis survey also shows 67% of respondents expect the industry to face between $80 billion and $100 billion of underwriting losses due to the pandemic. This is roughly in line with Lloyd’s of London’s earlier estimate of a $107 billion global industry impact.

But analysts from investment bank Berenberg said they believe global COVID-19 claims will be more manageable, estimating a range from $50 billion to $70 billion for the total bill. The analysts don’t specify whether this includes both life and non-life insurance claims from the pandemic, but they do point to the estimate from Lloyd’s of London as being too high.

“We estimate $50-70bn for global COVID-19 claims,” Berenberg’s analysts state. “Significantly less than the $107bn estimate reported by the Lloyd’s of London market estimate on 14 May.”

Las Vegas Hospitality Union Sues Employers

Las Vegas Culinary Workers Union Local 226 is suing several employers on the Las Vegas strip over unsafe working conditions during the coronavirus pandemic, Business Insurance reported.

The union, representing 60,000 workers, said in a statement it is asking for injunctive relief under the Labor-Management Relations Act based on the “hazardous working conditions” workers face.

The lawsuit alleges casino hotels have not protected workers, their families, and their community from the spread of COVID-19 and that current rules and procedures in place for responding to workers contracting COVID-19 have been “wholly and dangerously inadequate.”

The Culinary Union made a number of requests for policy changes, including daily cleaning of guest rooms, mandatory testing of all employees for COVID-19 before returning to work and regular testing thereafter, adequate personal protective equipment for workers, and a requirement that guests wear face masks in all public areas.

Best Warning on COVID-19 Workers’ Comp Laws

Insurance rating agency A.M. Best has warned that legal efforts in several U.S. states to expand workers’ compensation coverage to allow employees to claim for COVID-19 will have a negative impact on re/insurers, Reinsurance News reports.

The crisis has resulted in many employees now working from home, but a significant part of the workforce still needs to be present and public facing, and this is the group new state laws aim to support. For these workers, some states are looking to shift the burden to the insurer to prove that an employee contracting COVID-19 did not do so while on the job.

“This shift in the burden of proof could lead to significant additional losses to a segment already under pressure and result in increased reserve estimates and higher combined ratios,” A.M. Best said.

Given that assumptions used in pricing and actual loss emergence diverge significantly, these legislative changes will result in an increase in loss estimates and could affect earnings.

Businesses Ask Patrons to Waive Right to Sue

As businesses reopen across the U.S. after coronavirus shutdowns, many are requiring customers and workers to sign forms saying they won’t sue if they catch COVID-19, Associated Press reported.

Businesses fear they could be the target of litigation, even if they adhere to safety precautions from the Centers for Disease Control and Prevention and state health officials. But workers’ rights groups say the forms force employees to sign away their rights should they get sick.

So far, at least six states — Utah, North Carolina, Louisiana, Oklahoma, Arkansas and Alabama — have such limits through legislation or executive orders, and others are considering them. Business groups such as the U.S. Chamber of Commerce are lobbying for national liability protections.

Insurers and the Economy

P&C COVID-19 Wrap-upThe Path to Reopening

June 17, 2020 Jeff Dunsavage Leave a comment

Just as it has played a key role in responding to the COVID-19 pandemic crisis, the insurance industry will be integral to the economic recovery as businesses and communities reopen.

Aon forms recovery coalition

Re/insurance broker Aon has formed a coalition of companies and organizations to focus on aiding social and economic recovery in the wake of the COVID-19 pandemic, Reinsurance News reports.

Starting in Chicago, the coalition will create a model and framework to inform criteria and guidelines to help restart the economy worldwide, with the aim of scaling the work to other key geographies, including London, New York, Singapore and Tokyo. The coalition will work closely with Illinois Governor J.B. Pritzker’s and Mayor Lightfoot’s offices to ensure alignment with public health and city/state official recommendations.

The broker believes this will help to assess impact and measurement of efforts, evaluate the latest technologies, and develop guidelines to help navigate the challenges businesses face as society reopens.

“We have used our expertise to assist clients in maintaining operations and mitigating risk during the pandemic—and believe we have a responsibility to play a larger role in helping the private and public sector navigate the recovery,” said Aon CEO Greg Case.

Initial coalition members include: Abbott, Accenture, Allstate, Beam Suntory, BMO Harris, CDW, CNA, ComEd, ConAgra, Exelon, Fortuna Brands, Hyatt, JLL, McDonald’s, Mondelez, Morningstar, Motorola Solutions, Sterling Bay, Ulta Beauty, United Airlines, Walgreens, Whirlpool, and Zurich.

S&P panelists wary of post-COVID-19 headwinds

A panel of property and casualty insurers at the S&P Global Ratings’ Annual Insurance Conference raised concerns about the lasting impact of the COVID-19 pandemic, Reinsurance News reports.

S&P analysts currently believe COVID-19 related losses will total between $15 billion and $30 billion for the U.S. P&C market alone over the next two years.

The panelists agreed that coverage for pandemic-induced business interruptions and losses will be a complicated issue for the industry to face, even though viruses are generally not a covered peril for commercial properties.

“I never envisioned managing through a global pandemic,” said Christopher Swift of The Hartford.

“Clearly the challenge is how you are operating both internally and externally,” said W. Robert Berkley, Jr., of WR Berkley. “It calls for flexibility, but also for the ability to plan amid uncertainty.”

Panelists said workers’ compensation claims due to COVID-19 illnesses could be an inflection point, though, as states scrutinize policies given the rising number of these claims. If coverage is expanded, insurers will need to evaluate this risk and price accordingly.

Moderator Kevin Ahern, managing director and analytical manager, S&P Global Ratings, noted that the U.S. P&C market faces many headwinds, not just those related to COVID-19. These include competitive pressures, the pricing/underwriting/reinsurance environment, and evolving regulatory and legislative developments.

Iowa Legislature approves COVID-19 liability shield

Legislation headed to Iowa Gov. Kim Reynolds’ desk would provide liability limitations on potential COVID-19 lawsuits for a broad range of businesses and organizations — among them restaurants, retail establishments, meatpacking plants, churches, medical providers and senior care facilities — provided they followed public health guidance, Business Record reported.

Senate File 2338, the COVID-19 Response and Back-to-Business Limited Liability Act, would prohibit individuals from filing a civil lawsuit against a business or health care organization unless it relates to a minimum medical condition (a diagnosis of COVID-19 that requires in-patient hospitalization or results in death) or involves an act that was intended to cause harm or that constitutes actual malice.

The legislation would protect tenants, lessees and occupants of any premises — including any commercial, residential, educational, religious, governmental, cultural, charitable or health care facility — in which a person is invited in and is exposed to COVID-19. 

However, liability would extend to anyone who “recklessly disregards a substantial and unnecessary risk that the individual would be exposed to COVID-19,” or exposes the individual to COVID-19 through an act that constitutes actual malice or intentionally exposes the individual to COVID-19.

The provisions, which would be retroactive to Jan. 1, also shield health care providers from liability for civil damages “for causing or contributing, directly or indirectly, to the death or injury of an individual as a result of the health care provider’s acts or omissions while providing or arranging health care in support of the state’s response to COVID-19.”

Ill. workers comp measure becomes law

Legislation signed into law in Illinois will provide worker compensation benefits for front-line and essential workers who contract COVID-19 on the job under certain conditions, Business Insurance reports.

Gov. J.B. Pritzker signed H.B. 2455, which will provide death benefits for first responders who were presumably infected with COVID-19 on duty and also revises state code to expand unemployment benefits and enhance sick pay and leave for workers who contract the virus.

Under the law, employers can rebut claims under certain conditions, including if they can demonstrate the workplace was following current public health guidelines for two weeks before the employee claims to have contracted the virus; provide proof the employee was exposed by another source outside the workplace; or that the employee was working from home for at least 14 days before the claimed injury.

The law also says first responders, including police officers and firefighter who die after testing positive for COVID-19 or its antibodies, are entitled to death benefits. However, the virus must have been determined to have been contracted between March 9 — the first day of Illinois’ governor-mandated stay-at-home order — and Dec. 31, 2020. Under the law, the date of contraction is either the date of diagnosis with COVID-19 or the date the first responder was unable to work due to symptoms that were later diagnosed as related to COVID-19 infection, whichever occurred first.

Insurers and the Economy

Taking Care with Economic Headlines

June 11, 2020 Maria Sassian Leave a comment

By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute

In normal times, economic news isn’t something many people pay attention to, other than—possibly—at the headline level. And the headlines generally sufficiently convey what’s happening with the economy. But we’re entering a period in which the usual measurements of economic activity might be grossly misleading.

Take real GDP, for example. This is the inflation-adjusted measure of the total output of goods and services for the economy. When real GDP is growing from one calendar quarter to the next, that’s a good sign. The growth is often pretty small, percentagewise, and so it is typically expressed as a SAAR (seasonally-adjusted annual rate). This means that the rate for a quarter is treated as if it would continue at the same rate for the next three quarters. This virtually never happens, but it has become the conventional way to express GDP changes, nevertheless.

To illustrate the effect of expressing real GDP changes as SAAR, look at Figure 1.

This chart uses data provided by Blue Chip Economic Indicators, a publisher of a monthly survey of 53 econometric forecasts. Blue Chip averages the 10 highest, the 10 lowest, as well as the median forecasts, and we’ve graphed them in Figure 1. Note that the median of the forecasts in 2020:Q2 is -35.7 percent. This is a staggering dropoff in the economy, but of course no one is actually predicting that the economy would sink by 8.9 percent per quarter each quarter through 2021:Q1 (which is what results from the SAAR adjustment).

So be prepared for gloom-and-doom headlines in the fall when the Bureau of Economic Analysis publishes its measure of the real growth (or shrinkage) of the U.S. economy in the second calendar quarter.

On the other hand, note from Figure 1 that the GDP growth rates for 2020:Q3 and onward are all positive numbers. This is a picture of an economy that is shrinking for only one quarter—the V-shaped recovery that some economists (not us at the Triple-I) have forecast. This too is a distorted impression. To see why, look at Figure 2.

In Figure 2 you see a small dropoff from 2019:Q4 to 2020:Q1 and the big dropoff from 2020:Q1 to 2020:Q2. You also see growth each quarter from 2020:Q3 onward through the end of 2021. However, despite this growth the economy doesn’t even reach the level of output in 2020:Q1—which includes the first month of the recession—at the end of the 2021 calendar year. On New Year’s Day 2022 we will perhaps be celebrating six consecutive calendar quarters of economic growth, but in relation to the prior non-recession years we will still be lacking (assuming that the Blue Chip median forecast is correct).

If you were to match the pattern of recovery to an alphabet letter, you wouldn’t call it a V; there really isn’t a direct correlate to the slow but steady return to the pre-recession level, but a U might suggest that the economy is taking a while to recover fully.

Auto Insurance, Business Insurance, Business Risk, Health & Safety, Insurers and the Economy, Legal Environment, Regulation, Risk Management, Workers Compensation

CORONAVIRUS WRAP-UP: PROPERTY AND CASUALTY (4/27/2020)

April 27, 2020 Jeff Dunsavage Leave a comment

Accounting Rules

NAIC Working Group Approves Flexible COVID-19 Accounting Rules

Automobile Insurance

How the Coronavirus Could Change U.S. Personal Auto Insurance

Business Interruption

Travelers, Insured Law Firm Spar Over Civil Authority Business Income Loss Claim

States Seek to Force Insurance Companies to Pay Those With Business Interruption Policies

Covid-19 Business Interruption Existential Threat, Reinsurance Capital Availability Key: Willis Re

Credit Insurance

Governments should backstop trade credit

Litigation

The Race Is on to Lead Business Interruption Insurance Litigation

What Won’t Cure Corona: Lawsuits

6 Types Of Employment Lawsuits To Expect In The Wake Of COVID-19

Editorial: Stopping a Lawsuit Epidemic

Kudlow: Businesses shouldn’t be held liable for employees and customers getting coronavirus

Corporate America Seeks Legal Protection for When Coronavirus Lockedowns Lift

Profits & Losses

Coronavirus Costs Weigh on Travelers’ Profit

Coronavirus Will Be Largest Event in Insurance History, Says Chubb CEO

Coronavirus To Be Largest Industry Loss Ever: Chubb’s Greenberg & Lloyd’s Neal

Covid-19 P&C Insurance Industry Loss Estimated $40bn – $80bn: Dowling

Chubb Classifies Covid-19 as a Catastrophe Event

Covid-19 Claims Manageable, But Reinsurers Face Formidable Challenges: Willis Re

Specialty Lines

Companies Can Expect Higher D&O Rates, Lower Limits: Experts

Lack of Adequate Insurance Puts Healthcare Workers At Risk of Malpractice Lawsuits

Workers Compensation

States Easing Path to Workers Compensation Benefits for Coronavirus Workers

Changing Virus Guidance Creates Balancing Act For Essential Employers

Employers Pushing Back as States Expand Work Comp to Cover COVID-19

Workplace Safety For COVID-19 Essential Workers

From the Triple-I Blog:

TRIPLE-I CEO AMONG PANELISTS DISCUSSING BUSINESS INTERRUPTION INSURANCE LEGISLATION

INSURERS RESPOND TO COVID-19 (4/24/2020)

CORONAVIRUS WRAP-UP: LIFE AND HEALTH INSURANCE (4/22/2020)

CORONAVIRUS WRAP-UP: DATA AND VISUALIZATIONS (4/20/2020)

Business Insurance, Business Risk, Insurers and the Economy

Triple-I CEO Among Panelists Discussing Business Interruption Insurance Legislation

April 24, 2020 Jeff Dunsavage Leave a comment

Triple-I CEO Sean Kevelighan today joined legislators and legal experts to discuss proposed measures that could retroactively rewrite business interruption insurance policies.

“The insurance industry is applying forward-thinking solutions to take care of its customers, communities, and employees during the COVID-19 crisis,” Kevelighan said, citing more than $10 billion so far returned to customers through premium relief; $200 million in charitable donations; and insurers pledging not to lay off employees during the crisis and implementing innovative solutions to conduct daily operations while respecting social distancing. “We’re deeply engaged in mitigating the economic impact of this pandemic.”

But the industry can only do these things – while keeping its promises to policyholders and preparing for impending catastrophes – if policyholder surplus isn’t eliminated, as it could be if some of the proposed legislative “solutions” were enacted.

Legislation has been discussed or introduced in Louisiana, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and South Carolina that would retroactively enact business interruption coverage into existing policies despite an absence of the physical damage required in property policies and/or express exclusions for communicable diseases in those policies.

Kevelighan explained how policyholder surplus provides a cushion that enables insurers to meet their obligations, even when large, unexpected catastrophes occur. He showed how retroactively rewriting insurance contracts could make it impossible for insurers to play their critical role as “financial first responders.”

The scenarios he discussed could cost the industry $150 billion and $380 billion per month – “quickly eliminating the surplus it has taken the industry centuries to accumulate.”

And they would do this in the midst of a tornado season that is shaping up to be the deadliest in eight years and as a “more active than normal” hurricane season approaches.

Kevelighan made his remarks during a webinar sponsored by the National Council of Insurance Legislators (NCOIL) and the Rutgers Center for Risk and Responsibility at Rutgers Law School. Other panelists included NCOIL President and Indiana Rep. Matt Lehman; New Jersey Assemblyman Lou Greenwald; and Jay Feinman and Adam Scales, Professors of Law at Rutgers Law School and Co-Directors of the Rutgers Center for Risk and Responsibility.

The panelists all expressed support for the creation of a COVID-19 Business Interruption and Cancellation Claims Fund, similar to the 9/11 Victims Compensation Fund enacted by Congress in 2001, for businesses suffering from costs related to the interruption of their businesses, as well as the many associations that have had to cancel events. Funded by the federal government and operated by a special federal administrator, it would facilitate distribution of federal funds and liquidity to impacted businesses during this time of incalculable business interruption.

Click here to view the presentation.