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Apr 2020

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The Wuhan Clan

Source: Asia Insurance Review | Mar 2020

“When it’s an emerging country facing a big catastrophe, it’s a drama and people can lose everything … Resilience is a key word in today’s world. Resilience is at the heart of insurance and reinsurance to help people overcome all the difficulties and catastrophes they can face.”
 
This was how SCOR chairman and CEO Denis Kessler rounded off an interview on the sidelines of Les Rendez-Vous de Septembre in Monte Carlo last year. 
 
Resilience is also at the heart of the Global Risks Report 2020 from the World Economic Forum, published in time for Davos this year. The report segments the global risk landscape into categories: Economic, environmental, geopolitical, societal and technological.
 
The report predicts that the five most likely global risks in 2020 will all be environmental, including extreme weather, climate action failure, natural disasters, biodiversity loss and human-made environmental disasters.
 
It is only when we get to the 10th biggest risk in terms of impact that we stumble across infectious diseases. In fact the report last identified infectious diseases as a top five risk in 2008 where it featured as the fifth biggest risk (down from fourth in 2007). It seems that the further we moved away from the SARS epidemic of 2003 the less we thought about pandemics (Ebola and Zika notwithstanding). 
 
Overall the Wuhan experience suggests that individuals and businesses are not prepared for a pandemic and so are not resilient - with a spike in insurance claims from businesses in Asia involved in travel, hospitality and events expected. An uptick in life and health claims is also forecast.
 
As is so often the case, the biggest problem facing the industry may be lack of clarity: Does this specific policy offer that specific cover in this specific instance? 
 
Some global corporates buy insurance that covers communicable diseases but to be competitive in terms of cost, most standard insurance policies exclude pandemics. Some insurers have specific exclusions in their most basic policies for virus cover while many event-cancellation policies will not cover the Wuhan fallout.
 
Willis Towers Watson corporate risk and broking head of claims in Asia Neil Thomas said that some businesses may hope their property insurance policies will cover business interruption but he pointed out that the trigger for such claims is often that the property insured is damaged. “As most of the reduction in income in the current circumstance is not related to a specific property being quarantined, it is unlikely that most policies will give cover,” he said. 
 
Some insurers have moved quickly to demonstrate that they understood the gravity of the situation. Sun Life in Hong Kong, for instance, announced new measures offering support to individual insurance clients who have medical benefits and are diagnosed with the infection between 24 January and 30 April.
 
At the other end of the spectrum Allianz (China) Insurance said that it was setting up an emergency response fund to support China’s fight against the epidemic with an initial pledge of CNY4m ($570,000), coming in part from Allianz’s disaster recovery fund and in part from its operating entities in China and the region.
 
Most impressively, the Life Insurance Association of Malaysia and Malaysian Takaful Association issued a joint statement indicating that all life insurance companies and takaful operators in Malaysia would provide hospitalisation coverage/treatment due to the coronavirus to their policyholders and certificate holders.
 
Many others were prepared to wait and see how things panned out. A major life player in Japan told Asia insurance review “we have not yet released any official announcement on the incident while we are, of course, closely monitoring the situation.”
 
If resilience really is at the heart of insurance and reinsurance then the industry needs to be a leader and not a follower in times of extreme stress. A 
 
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