Insurance European P&C (Re)insurance - COVID-19: the biggest insured loss ever?

Credit & surety/trade credit could be another driver of losses. We estimate $8-16bn of insured losses for European Property & Casualty, and we expect >50% to go to reinsurers given relatively low retentions of the big 3 trade credit players

24 Apr 2020

Source: UBS estimates

The figure illustrates UBS's estimates of COVID-19 insured losses for the credit and surety market at $8-16 billion

We up our COVID-19 insured loss estimates from ~$20-40bn to ~$30-60bn

The industry narrative on potential COVID-19 claims has deteriorated sharply in the last two  weeks.  The  trade  press  suggests  COVID-19  could  be  the  most  costly  insured  loss  on record, ~$90bn). We believe it is rising concern around international (non-US) business interruption ("BI") driving this caution. We deep dive on BI and also credit &  surety  in  this  report,  the  two  main  drivers  of  expected  losses.  Whilst  we  sense  a  $90bn  insured  loss  still  looks  high,  uncertainty  prevails. 

Business interruption and trade credit likely to drive material market losses

Business  interruption  remains  the  key  uncertainty.  Reports  indicate  losses  are  mounting on non-US BI where coverage for pandemic is included. We now expect $7-22bn of BI losses (previously: $5-15bn). The other key driver is credit & surety; we expect $8-16bn of losses. We see this as more of a reinsurance loss given low primary exposures.

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