COVID-19 An ‘Uninsurable’ Event, P&C Trade Exec Says

By John Hilton

Estimated small business losses due to COVID-19 are being adjusted northward from $255 billion to $431 billion per month, according to data put together by the American Property Casualty Insurance Association.

Many businesses had hopes their commercial business interruption insurance would reimburse them for COVID-19 losses. But this insurance generally contains exclusions for war, flood and pandemics.

Some state lawmakers are trying to apply retroactive coverage to those policies. That would be damaging to many insurers, said David A. Sampson, president and CEO of the APCIA.

“Many commercial insurance policies, including those that have business interruption coverage, do not provide coverage for communicable diseases or viruses such as COVID-19," he said. “Pandemic outbreaks are uninsured because they are uninsurable.

One look at the bottom line reveals why the P&C industry couldn't realistically insure something as massive as a countrywide pandemic. The annual premiums for all commercial property risks in the key insurance lines is $71 billion per year, or about $6 billion a month.

Lawmakers Seek Coverage

Lawmakers in at least four states -- New York, Massachusetts, New Jersey and Ohio -- are pushing legislation that would force insurers to cover shutdowns due to the COVID-19 pandemic under existing business interruption insurance policies.

Restaurant owners have banded together for lawsuits in California and Illinois challenging the pandemic exclusion. Plaintiffs argue that they are shut down due to a government order, and their business interruption insurance should be activated.

Forcing insurers to retroactively cover COVID-19 losses would threaten the solvency of many, Sampson said.

“Any action to fundamentally alter business interruption provisions specifically, or property insurance generally, to retroactively mandate insurance coverage for viruses by voiding those exclusions, would immediately subject insurers to claim payment liability that threatens solvency and the ability to make good on the actual promises made in existing insurance policies," he said in a news release.

Continuity losses for small businesses are approximately 43 to 72 times the monthly commercial property insurance premiums, he added, which includes coverage for losses as a result of such perils as fire, wind, hail, and water leaks.

“Insurance stability is especially important in a time of increased natural catastrophes," Sampson said. "Spring flooding season is underway, hurricane season is around the corner, and wildfires pose a threat year-round."

APCIA data sources include Bureau of Labor Statistics (employment, wages), Insurance Services Office (Verisk Analytics, Inc.), Houston Chronicle (average revenue and profit), and other published reports.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.