Advisen

COVID-19 business interruption claims would cost insurers up to $383 billion per month

New York lawmakers file legislation to compel insurers to pay BI claims

By Erin Ayers, Advisen

As pressure builds for the industry to shoulder some of the economic burden from the coronavirus pandemic, property-casualty insurers outlined just how much business interruption losses from shuttered businesses would cost: up to $383 billion per month, according to the American Property Casualty Insurance Association.

The estimate includes losses from businesses with fewer than 100 employees and ranges from $220 billion to $383 billion, according to David Sampson, APCIA president and CEO. Surplus for the entire P/C industry comes in at about $800 billion and is there to pay all future insured home, auto, and business losses.

“For perspective, our industry responded to more than three million claims, the most ever handled by the property casualty industry due to catastrophes during the 2005 hurricane season that included Hurricanes Katrina, Rita, Wilma, and several others,” said Sampson. “While a significant number, it dwarfs in comparison to the potential for 30 million or more claims from each of the small businesses operating in the United States today.”

He added, “Insurance stability is especially important in a time of increased natural catastrophes. Spring flood season is underway, hurricane season is around the corner, and wildfires pose a threat year-round.”

As the industry emphasized the need for stability, New York lawmakers joined Ohio, New Jersey, and Massachusetts in introducing legislation (AB-10226) to require property insurers to pay out for COVID-19-related business interruption losses from entities with fewer than 100 employees.

Like other states, the New York bill, sponsored by Assembly members Robert Carroll and Patricia Fahy, includes language that would allow insurers to apply for reimbursement on the claims from a state pool.

These bills have been highlighted as a potential lifeline for businesses, particularly restaurants, that have been hit hard by civilly-mandated shutdowns. Multiple lawsuits have been filed by restaurants over denials or seeking declaratory judgments on policies. The insurance industry has faced harsh criticism over what many reports have called “the fine print” of property insurance policies, a majority of which contain exclusions for viral/bacterial contamination and require direct physical loss that causes a shutdown.

Editor Erin Ayers can be reached at eayers@advisen.com.