"i think the statement made by FFH implies possibly a degree of conservatism reflecting the underlying uncertainty and long-tail nature of future claims."
I agree & would add that FFH has continued favourable reserve development YOY so convservative reserving is their historical norm.
The Covid impact on (re)insurers is a mixed bag and there are segments that clearly have benefitted. Not a big deal for Fairfax but, with decreased mobility, car insurers don't seem to complain. That aspect, however, may help to explain the otherwise unusual favorable development in some of the segments. It will take time to figure out but Fairfax has, in the latest part of the cycle, showed better than average (relative basis) favorable development but there is no evidence that shows that it will completely diverge compared to industry-wide trends.
Another aspect of the Covid issue is duration and development patterns. For workers comp lines (Zenith), the reserve development (from claims not still incurred but that need to be priced beforehand)
will be influenced by the presently unknown evolution of the virus problem, the public policy responses to it as well as
future legislation for coverage. Event cancellation settlement should be straightforward but, even if the insurers' legal position in general appears strong for the business interruption claims, the extent of those claims remain presently unknown. Typically (one would need to assess specifically for Fairfax; i assume they use the usual policy language), the BI contracts include a specific duration (limit) clause but, if history is any guide, BI claims after previous catastrophes took a while to manifest. There are a lot of businesses looking at their options now. It would be expected that most claims will have clearer visibility when legal actions are taken (or not) somewhere around 2021. It is possible that some of these claims have already been "reported" without a clear quantifiable and specific claim amount. Sometimes, the IBNR account includes the typical not reported claims but may also include a "pipeline" reserve where a claim is considered in process, which results in some 'flexibilty' for reporting purposes. It appears that the unfavorable reserve development recognized by Fairfax for the BI claims should eventually reverse.
