Ratings agency director says there is no ‘appetite for providing cover as part of general property business interruption’

Insurers are not facing the same exposure to business interruption (BI) claims in this year’s national lockdown compared to the initial coronavirus lockdown last March as most insurers have since added “exclusionary language to their property BI policies”, said Graham Coutts, senior director and head of EMEA reinsurance at Fitch Ratings.

Speaking at a webinar titled ‘Fitch’s Insurance Outlook 2021: The Bumpy Road Ahead’ – featuring as part of the firm’s virtual Annual Insurance Roadshow – Coutts discussed whether the legal action surrounding BI claims linked to the pandemic, which culminated in the Supreme Court’s judgment last week, would continue to impact the insurance market.

He said: “The outcome of the court case was broadly negative for insurers; most of the findings went against them.

“But what we’ve seen is that loss estimates didn’t go up too much and it’s also provided some certainty over the quantum of the losses, so that will allow those insurers to focus on taking advantage of future opportunities and almost drawing a line under the losses from last year.

“There’s the question of immediate cover for BI losses and what we’ve seen is that most insurers are adding exclusionary language to their property BI policies. The latest lockdown, there’s much less exposure – people have already excluded that on any renewals, so it’s only as policies run off that there’s still some outstanding exposure, but it’s much lower.”

He added that he does not believe there is “any appetite for providing [Covid-19] cover as part of general property business interruption – that wasn’t how it was envisaged when it was designed. I think that’s unlikely to be part of the future pandemic response.”

In the session, he also addressed “the insurability of this kind of risk at all”.

“It is extremely systemic,” he continued. “It’s almost binary in that either almost no-one claims, or everyone claims and that will be at the same time, so it’s very difficult to diversify the risk.

“Perhaps it could be insurable in some way, but I think you would need some level of government support to be able to make that work successfully.”