From CNBB : ''Coronavirus will be the largest loss on record for insurers, Lloyd’s of London says''
Would Fairfax insurance businesses face such a large loss as well?
https://www.cnbc.com/2020/05/14/lloyds-of-london-coronavirus-will-be-largest-loss-on-record-for-insurers.html
Bry
Throwing that one in again to get you guys' input. Could Fairfax insurance businesses face similar losses? As large as Lloyd's?
I think you need to think about covid on a sub-by-sub basis.
Prem assures us that the US subs (C&F) used the industry standard virus exclusions in their commercial contracts, which should protect them from business interruption claims. It seems like about half of the US states have enacted legislation to provide immunity to nursing homes for covid claims (
https://time.com/5835228/nursing-homes-legal-immunity-coronavirus/ ) so that too should help limit litigation. So far, I have not read about any litigation involving C&F, but there are definitely many cases already launched against other US primary insurers (KJP posted this in the P&C thread:
https://www.law360.com/pennsylvania/articles/1273308 ).
Given that Northbridge didn't take a covid provision, one presumes that they used some sort of exclusionary language for business interruption. What is more, nursing home litigation risk in Canada is less pronounced because getting a class certified is a bit more difficult, and you can usually only sue for actual economic damages in Canada -- punitive damages are very, very rare in Canada, and that would be the expensive part of the claim because the economic damage from the premature death of an 88 year-old is pretty minimal because most of them don't have a job or run a business (ie, when an senior citizen dies a year or two sooner than he should have, virtually no income is lost).
Zenith is one of the subs that causes me consternation. Zenith has stated on its website that a covid related workers comp claim needs to demonstrate that the virus was caught in the workplace rather than in the community (
https://www.thezenith.com/wp-content/uploads/Zenith-Coronavirus-Update.pdf ). In most cases, that's a pretty hard thing to prove, but I do wonder whether there won't be some employers/employees who argue that the existence of a covid cluster in a workplace is adequate proof of virus provenance. In particular, nursing homes, public transit agencies and slaughter houses have all had a heavy incidence of covid, resulting in time off and sometimes death of employees. I question whether some of that might ultimately come back to Zenith if groups of employees convince a judge or jury that the existence of an employment related cluster is adequate proof that covid was actually a workplace injury. But, I don't recall seeing any covid provision for Zenith.
Like every other reinsurer in the world, Odyssey is a bit of a concern because it's impossible for a shareholder to have any idea of what exactly is being reinsured. Odyssey took a $50m covid provision, so obviously there are at least a few policies that are a problem. But, is Odyssey reinsuring a primary company that was sloppy in the wording of its business interruption insurance? Hard to know, but it's a point of concern.
The other sub that might be a problem is Brit. Brit does business in the UK and apparently some of the commercial policies written by UK insurers did not have a virus exclusion, so that might be the driver behind Lloyds' large estimate of indemnities. Brit did take a covid provision in Q1, but who knows the extent of their problem? Did they write many commercial policies with business interruption? What reinsurance have they taken out on their commercial book?
At this point, we don't have many options other than to take Prem at his word and assume that the covid claims will not be very large. We don't have many options other than to accept that the $84m provision in Q1 is a fair estimate of the ultimate covid liability. But, I certainly don't blame you for being concerned about how this might evolve.
SJ
