By Jing Yang
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 22, 2020).
The coronavirus is proving costly for global business -- and insurance won't be much help.
With large parts of China in lockdown and other Asian countries on high alert, the virus, which causes an acute respiratory disease called Covid-19, has disrupted shops, hotels, airlines, factories and much else. Multinationals including Apple and Starbucks have closed many outlets in mainland China.
It has some companies poring over insurance policies in hopes of filing a claim for losses from business interruptions. "We are getting lots of questions about it," said Gisele Norris, a strategic account manager at insurance broker and consultant Aon PLC, and co-leader of its global infectious disease task force.
The odds aren't great. Insurers and reinsurers learned a costly lesson from severe acute respiratory syndrome in 2002-03. In Hong Kong, HK$325 million ($41.8 million) was claimed for business interruptions from SARS; hotel chain Mandarin Oriental International Ltd. alone recouped US$16 million from its insurers, led by American International Group Inc.
Now insurers across the board exclude epidemics in standard business-interruption policies, which mainly cover property damage from events such as fire, terrorism and natural catastrophes.
"Since the SARS outbreak, insurers added specific exclusions for bacterial or viral outbreaks to our insurance coverage," said a spokeswoman for Yum China Holdings, which operates Pizza Hut and KFC in China and is the country's biggest restaurant group.
Forced to close more than three in 10 outlets, the group has warned of possible operating losses for at least the first quarter. Yum has a prudent financial policy and maintains a strong balance sheet, the spokeswoman added.
"The potential losses from communicable diseases can be terribly large," said Simon McConnell, Hong Kong-based managing partner at law firm Clyde & Co. "If all economic losses were insured, it would become commercially unviable for insurers themselves."
"Insurers are in the business of covering risks they can understand," said Neil Thomas, head of claims for Asia at insurance broker Willis Towers Watson. "There's not an insurer on the planet willing to put themselves on the front line of something they can't quantify."
The current epidemic is broader in scale than SARS, infecting more than 75,000 people globally and killing more than 2,100 as of Feb. 21, according to the World Health Organization -- far exceeding the SARS totals of more than 8,000 infected and fewer than 800 killed.
It is also hitting a Chinese economy that is much larger and more connected to the world than in 2003, so the economic impact is likely to exceed the $54 billion that the World Bank estimates SARS cost the global economy. Disruptions in China's service sector alone could slice 474 billion yuan ($67.5 billion) off gross domestic product in the first quarter, China Renaissance Securities (Hong Kong) Ltd. estimates, with additional GDP lost in manufacturing and construction.
Insurers do offer costlier extended policies that cover public-health risks, often bought by leisure and travel companies. But they come with strict conditions.
Earlier this month, China's government ordered casinos in the semiautonomous city of Macau -- which include units of Wynn Resorts Ltd. and Sheldon Adelson's Las Vegas Sands Corp. -- to shut their doors for an unprecedented 15 days to help curb the spread of the virus. Their insurance, though, pays off only for closures caused by an infected person, according to Willis Towers Watson's Mr. Thomas.
"All the casinos have been looking carefully at their policies," he said Feb. 20. "No claims have been filed as of this moment, although some may make claims in due course." With Macau reporting no additional cases since the shutdown, the casinos were allowed to reopen Feb. 20.
Organizers and sponsors of major cultural and sports events stand to lose millions of dollars, depending on their insurance coverage.
Formula One's Shanghai Grand Prix, the Cathay Pacific/HSBC Hong Kong Sevens rugby tournament and Mobile World Congress in Barcelona, the biggest conference of the global telecoms industry, have either been canceled or postponed.
Some, however, have also learned from earlier experience. The Hong Kong Rugby Union, organizer of the Hong Kong Sevens, said since SARS it has made sure its event cancellation and insurance policies cover communicable diseases.
Serena Ng contributed to this article.
Write to Jing Yang at Jing.Yang@wsj.com