Chief executive Brian Duperreault describes Covid-19 as “the single largest CAT loss the industry has ever seen”
AIG has revealed it faces a limited exposure to business interruption claims in the wake of the Covid-19 pandemic as a result of tight policy wordings that exclude cover for viruses.
Speaking on a conference call following the announcement of the insurer’s first quarter trading update, president Peter Zaffino said:“The overwhelming majority [of our policies] contain exclusions for losses related to viruses, and otherwise require a showing that the virus caused direct physical loss or damage that was the cause of the business interruption.
“We are confident these exclusions and related terms and conditions will be upheld.”
Business interruption cover has become a point of contention during the coronavirus crisis, with Hiscox just one of the insurers facing a legal challenge after denying claims.
AIG’s shares rose by as much as 9.6% on Tuesday following the announcement, marking the insurer’s biggest single day increase since early April.
The insurer also revealed a $272m hit as a result of coronavirus, with losses largely stemming from virus-hit lines including travel, commercial property, trade credit and workers’ compensation policies.
These losses drove am $87m underwriting loss for the first quarter of 2020, with net investment income of $588m helping the insurer towards an adjusted pre-tax income of $501m.
In a statement announcing the results, AIG Chief Executive Officer Brian Duperreault said the coronavirus pandemic could result in record-breaking losses for the industry.
“While we believe Covid-19 will be the single largest CAT loss the industry has ever seen, the significant body of work our team has undertaken since late 2017 has served us well as we navigate through this evolving situation,” he said. “AIG was in a strong financial position before this crisis began and remains in a strong financial position today.”