Triple-I’s Chief Actuary: Insurers Are Navigating COVID-19’s Economic Fallout

The pandemic affected almost every link in the property/casualty value chain, but the industry weathered the stress well, according to Triple-I’s chief actuary, James Lynch.

“The U.S.’s property/casualty (P/C) insurers provided premium relief, retained employees, and weathered a capital market downturn while navigating this year’s COVID-19 pandemic,” he said at the Casualty Actuarial Society’s (CAS) virtual annual meeting on November 10.

“Private-passenger auto insurers returned around $14 billion in premiums this year to the nation’s drivers as miles driven dropped dramatically in the pandemic’s early months. This resulted in a five percent reduction in the cost of auto insurance for the typical driver in 2020 as compared to 2019. At the same time, the U.S.’s auto, home, and business insurers continued to employ two million-plus Americans as the industry responded to numerous natural disasters as well as the aftermath of civil unrest.”

This year’s record-setting hurricanes and wildfires, coupled with civil disorders in multiple states, have caused insured loss payouts totaling tens of billions of dollars. The policyholders’ surplus—the amount of money remaining after the industry’s cumulative liabilities are subtracted from its assets—stood at $826 billion as of June 30, 2020, down from a record-high $848 billion as of Dec. 31, 2019.

The economic uncertainty in the U.S.’s capital markets in 2020’s first-quarter caused unrealized capital losses (stock declines) in insurer investment portfolios, Lynch said. Insurers who have faced lawsuits related to pandemic-caused losses also have faced the financial challenges of defending themselves, he added.

“Business income (BI) insurance coverage disputes captured media attention. Yet lawmakers nationwide have to date resisted calls to rewrite these policies retroactively as insurers faced a steady stream of lawsuits over their unwillingness to pay these claims,” Lynch said, explaining how BI coverage, also known as business interruption insurance, is generally triggered only when a business incurs direct physical damage to the business’ property.

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