But reinsurance for its travel book and business interruption policy exclusions have limited the insurer’s exposure to the pandemic

RSA has received around 25,000 coronavirus-related claims up until the end of April at a cost of £25m net of reinsurance.

This includes approximately 23,000 travel insurance claims totalling £16m gross of reinsurance, an area which the insurer said is highly reinsured, as well as claims for wedding cancellation with an estimated reserve of £7m, and claims under certain business interruption and related coverages with an estimated claims reserve of  around £17m.

The great majority of the non-travel claims relate to the insurer’s UK and Ireland division.

The insurer also revealed that the great majority of business interruption claims are not expected to be eligible under their coverage terms for Covid-19-related claims, but that there are a number of areas where claims are being paid, mostly in certain specialist schemes and programmes.

RSA also revealed that in April claims frequency was down by between 20% and 55% compared to the same month in 2019, mostly reflecting Covid-19 impacts on activity levels, although the insurer said “it is not yet possible to assess how much of this data reflects delayed timing of claims or what the impact will be on claims severity of disrupted supply chains and other factors”.

The insurer said it is also expecting the pandemic to have an effect on written premium income for 2020 as some customers reduce their coverage in the wake of the crisis. It is also expecting an increase in bad debt to arise in the aftermath of the outbreak, and is actively working with those in most need on payment spreading plans.

Premium in Decline

RSA announced premium growth excluding exited business lines of -1% over the course of the first quarter of 2020, with group net written premiums down to £1,521m. When exited business lines are included, this decline in premium stands at 2%.

In the UK and International section of the business, premiums were down 5% excluding exits, which the insurer said was “better than our plan, and reflected the impact of underwriting actions in 2018 and 2019”.

The insurer also revealed that its regions commercial business and UK household book, areas targeted for expansion by the insurer, had seen positive premium growth over the quarter.

The insurer said that the impact of Covid-19, which materialised late in the quarter, was yet to impact profitability, but had affected the balance sheet.

As such, the insurer reported that its attritional loss ratio had improved for the group overall, as well as for each region of the business, while the written controllable expense ratio increased slightly overall, though absolute costs were down 1% in real terms.

RSA group chief executive Stephen Hester said the results reflected a continuation of the momentum the insurer had built up over the course of the previous 12 months.

“RSA’s first quarter results were strong, continuing the momentum seen in 2019,” he said. “However, focus has now naturally shifted. Our thoughts and deepest sympathies go to those most directly affected by Covid-19. And RSA’s attention is fixed on responding to the impacts of Covid-19 on economies, our customers and through that on ourselves.

“Whilst it is too early to estimate the extent of these, RSA is resilient and determined to sustain strong and appropriate support for our customers in these testing times. We are also very conscious of our shareholder responsibilities, especially with regards to restarting dividend payments when it is prudent to do so.”