The Insurance Information Institute held a presentation for state regulators on the COVID-19 crisis
In response to the COVID-19 pandemic, Triple-I CEO Sean Kevelighan and Senior Economist Dr. Michel Leonard gave a presentation on the crisis during a special session of the National Association of Insurance Commissioners on March 20, 2020. The presentation discussed the insurance industry’s financial stability as well as which areas of insurance will be most impacted by this crisis.
“This year marks Triple-I’s sixtieth anniversary, and we are proud to be able to report before this forum that today that the property-casualty (P/C) insurance industry is well-positioned to honor the promises it has made based on strong fundamentals, which include long-term risk management and an actuarially sound approach to underwriting,” said Sean Kevelighan, CEO, Triple-I, in remarks to the National Association of Insurance Commissioners (NAIC).
“It is important to appreciate that as much as this is a catastrophe of historic magnitude, there are more on the horizon—hurricanes, wildfires, floods—and we must remain prepared in the way that we have long-planned, so again, we can continue act as the financial first responder that we have been for several centuries,” Kevelighan stated.
The insurance industry is well-prepared to face the challenges created by the pandemic
In particular, the III noted in its presentation, that the following factors are reasons to be reassured of the insurance industry’s stability and ability to meet its financial obligations:
- U.S. P/C insurers’ cumulative assets exceeded its liabilities by more than $800 billion as of year-end 2019 – Eight times what P/C insurers paid for 2017’s U.S. natural disasters.
- Nearly 80 percent of P/C insurers’ portfolio exposure is to non-stock assets, such as high-quality corporate and municipal bonds with the industry having started reducing stock exposure in 2018 in anticipation of an economic slowdown well before Covid-19 volatility.
- U.S. P/C insurers’ ability to access global reinsurance markets allows them to spread U.S. financial risks worldwide.
- Business interruption claims not expected to impact P/C industry’s strong fundamentals.
- In unlikely individual insurer insolvency, existing state guaranty funds will pay claims on insurer’s behalf
Workers’ Compensation to see the highest impact from the COVID-19 crisis
According to the III, while the auto, property and business interruption lines of insurance are likely to see the lowest impact from this current crisis, Liability and D&O will see a more moderate impact, while workers’ compensation will likely see the highest impact.
Specifically, with respect to workers’ compensation carriers, the impact will derive from coverage of the following industries fighting on the front-lines of the COVID-19 pandemic:
- Hospitals, Medical Services, EMTs
- Law Enforcement, Fire Departments, First Responders
- Transportation and Retail
The III also noted that there also exist many grey areas with respect to workers’ compensation coverage for COVID-19. These grey areas could include:
- Clarity around source of infection arising from work
- Employers have exposure for workers working remotely but don’t control work environment
- Significant state-by-state differences
