Analysts for Standard & Poor’s Global Ratings shared a view that U.S. underwriting losses from COVID-19 would fall in the $15-$30 billion range. Risk officers speaking at a rating agency conference last week said the estimate is light.

S&P Director Stephen Guijarro revealed the rating agency’s projection, which is based on its research and information gathered from S&P’s rating universe, during an introductory session of the S&P’s Annual Insurance on Thursday, taking place virtually this year for the first time. Guijarro said the estimate is limited to the U.S.-only. It also assumes virus exclusions in commercial property policies with business interruption coverage will hold and that legislative efforts to ignore them will fail, Guijarro said.

“If these efforts were to gain any momentum or shelter-in-place restrictions were to be extended, these losses estimates could materially alter,” he said, noting that right now, the range is equivalent to a medium-to-large-sized catastrophe.

“The storm has made landfall but it hasn’t finished.
Sean Ringsted, Chubb

“The storm has made landfall but it hasn’t finished,” Ringsted said, noting that it’s part medical catastrophe and part economic catastrophe, with the latter set to play over 12-18 more months.

Greg Richardson, chief risk and strategy officer for TransRe, puts underwriting losses at a number “a little worse than S&P,” but agrees with the S&P conclusion that they will be manageable.

“The insurance industry, especially the P/C reinsurance segment, is all about volatility. So, we’ve been battered by extreme events every few years for the past 20 or 30 years. I think we understand risk. We’re prepared for it,” he said. “It’s manageable within our balance sheets, within our capacities. [But] it opens our eyes to things that maybe we didn’t expect to happen,” he said.

In particular, Richardson gave the example of one “well-known very, very proud and good insurance company, not an American one” [that] has been in the headlines because of commercial business interruption insurance policy wordings. “They went to enormous pains in that wording to eradicate any sort of coverage from cyber risk…Roll the tape back a year, and everybody was talking about cyber so much, you just got sick of it.”

The carrier thought so obsessively about cyber that it “left the door open” to disease pandemic exposure, he said, reporting that the word virus appears in this unnamed carrier’s policies in the context of cyber risk rather than human communicable disease.

For other lines, there are elements of uncertainty for primary carriers and reinsurers, he said. “To the extent commercial BI [business interruption] is in property-cat contracts, that would be something we certainly did not model or price for” as an industry, he said.

While TransRe writes twice as much casualty reinsurance business as property business, Richardson said he’s not too worried about COVID casualty exposures. “We don’t think even the most aggressive plaintiffs bar would try to ascribe fault to most insureds,” he said.

In terms of industry losses, he said he falls somewhere between S&P and Ringsted without giving a specific figure but noting that two downside risks play into this assessment: the financial downside which affects the liability side and the asset side, and the unknown around legislative and legal risk around commercial BI.”

“Those are big unknowns—potentially, if not black swans, brown swans that are lurking.”

During a later panel featuring industry CEOs, S&P polled the audience watching the virtual to give their views of ultimate losses, polling twice–both before and after industry executives spoke. It didn’t matter that the CEOs said that policy wordings for business interruption would hold given facts and the weight of historical case law in between the two polls. In both, only about 35 percent of attendees agreed with S&P’s $15-$30 billion range. Roughly 56-57 percent indicated that they believed the figure would surpass $30 billion.