Insurance industry's COVID-19 exposure outlined

The Indian insurance industry's exposure to COVID-19 claims is limited to event and regular health insurance coverage, according to Mr Devesh Srivastava, the chairman of GIC Re, the national reinsurer.

In a recent interview with Times of India, he said that while GIC Re does have exposure to domestic insurers’ books, which includes health insurance, this is largely on account of obligatory cessions, under which insurers transfer 5% of their risks and premiums to the reinsurer. The pandemic has led to an increase in the number of people buying health insurance.

Mr Srivastava also said that despite the coronavirus crisis, claims from businesses are unlikely. “Business interruption covers are bought by all corporates. But these policies will not be triggered as most of them come into force only if there is property damage,” he said. For instance, the airline industry, despite major losses, is not protected by an insurance cover. “For airlines, this is like the Icelandic volcano eruption in 2010 when most flights from Europe and America were grounded, yet no insurance claims were payable,” he said.

In India, the focus of event cancellation insurance has been largely around weather and terrorist attacks. Given that the country was not impacted by the swine flu pandemic or any other outbreaks, no one had really sought pandemic cover. Now though, most Indian organisers, like the Indian Premier League (IPL), have missed out on pandemic cover for events because the markets started shutting down soon after the outbreak in China.

Meanwhile, international insurers are beginning to exclude coronavirus even from liability covers like Directors & Officers policies, which protect management involved in legal suits. What this means is that if any of the stakeholders sue the management of a company for any reason that is triggered by the virus, the policy will not cover the defence.

Mr Subrata Mondal, executive vice president (underwriting) at IFFCO Tokio General Insurance, said, “By and large, a lot of reinsurers are excluding pandemic outbreaks across all lines, including liability lines.” He said that since liability insurance covers are driven by reinsurance, most of these policies are issued more or less on the reinsurer’s terms.

Source: Asia Insurance Review