Epidemic insurance exclusions to hit global firms’ finances

Most ‘standard’ insurance policies exclude outbreaks such as the novel coronavirus, experts say

Epidemic insurance exclusions to hit global firms’ finances

Insurance News

By Gabriel Olano

A wide range of global businesses are expected to sustain huge losses stemming from the outbreak of a new coronavirus in China, partly due to the exclusion of epidemics from most insurance policies, experts have warned.

With at least 132 reported fatalities in China and more cases being confirmed across the globe, companies are likely to face billions of dollars in losses due to business interruption and travel cancellation, a report by Reuters said.

“For insurers, the bulk of the claims from this outbreak will come from businesses, mainly travel, hospitality and event firms, followed by mortality and healthcare costs,” a Hong Kong-based insurance sector lawyer from a global law firm said in the report.

The lawyer, who requested anonymity due to lack of authority to speak to the media, said that while some global businesses buy insurance against communicable diseases, many ‘standard’ insurance policies do not include outbreaks such as epidemics and pandemics, in order to keep costs low.

Many major insurers cover risks such as earthquakes, typhoons, and plane crashes, but are withdrawing from other risks such as shipping, due to the large losses involved. According to industry experts, previous disease outbreaks such as SARS, Ebola, and Zika, have made insurers more cautious about covering these risks. Most basic coverage policies explicitly exclude outbreaks of certain viruses.

The hospitality sector will be one of the worst-hit, according to the report, as the lack of insurance means that they will absorb the financial losses themselves.

While specific insurance products for infectious diseases have been developed, uptake for these has remained quite low, insurers said. Meanwhile, insurance giants Aviva, Allianz, and AXA have announced that individual policyholders will be covered if they are impacted by the viral outbreak, as long as they adhere to travel advisories from their respective governments.

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