The Trifecta Facing Property Carriers

There’s an English expression (which, in reality may be the translation of an old Chinese curse); “may you live in interesting times.” Of course, many believe its better to live in uninteresting times of peace and tranquility, rather than in times of “interesting” upheaval.

It would seem the Property/Casualty insurance industry has entered an interesting time. Property carriers may be facing years of litigation from insureds filing claims seeking coverage for business interruption claims arising from the coronavirus pandemic. In addition, several states are considering legislation which would mandate that property carriers retroactively cover those business interruption claims. Some have estimated that, if covered, these claims could cost the Insurance industry hundreds of billions of dollars. Litigation will likely take years. The federal government is also considering providing a back stop for pandemic coverage much like they do for terrorism. This, if passed, would apply to future coverage provided for pandemics. In addition, while every state has at least begun to reopen its economy, health experts still warn of the potential for a second spike of infections, hospitalizations and deaths – as well as the potential for a second wave of COVID-19 infections coming this fall – either or both of which could result in businesses again closing perhaps adding pressure for states to pass the bills mandating coverage and/or increase the litigation and costs facing the insurance industry.

Just as the economy was reopening around the country, on May 25th Minneapolis, Minnesota police officers killed a handcuffed black man by kneeling on his neck for nearly nine minutes. Understandably, this resulted in outrage, demonstrations and protests in cities and towns nationwide against excessive force used by the police against minorities. Unfortunately, some turned to vandalism, looting and arson. At the time of this writing, protests, thankfully, have become more peaceful in nature. Damages caused by riots and civil commotion are often covered under property policies. There has been some speculation that this series of events may result in the highest pay out by the insurance industry for civil commotion claims.

Meanwhile, June 1st is the beginning of hurricane season. That said, for the sixth year in a row there have been named storms before June 1st (can you say climate change). The third named storm of the season took place on June 2nd. For 2020, the National Oceanic and Atmospheric Administration’s (NOAA’s) Climate Prediction Center is forecasting a busy Atlantic hurricane season with likely 13 to 19 named storms, 6 to 10 that could become hurricanes, with 3 to 6 becoming major hurricanes (category 3, 4 or 5). According to NOAA, an average hurricane season produces 12 named storms, of which 6 become hurricanes, including 3 major hurricanes (footnote: www.noaa.gov, “Busy Atlantic hurricane season predicted for 2020,” 5/21/20).

There’s no doubt that each of the scenarios discussed above could be significant by themselves, but property carriers and their reinsurers will be dealing with them at roughly the same time.

Let’s not forget the casualty side.

The casualty side of the P/C industry will also likely be busy. The COVID -19 pandemic could result in medical professional claims activity and lawsuits filed against nursing homes. Amazon employees have recently filed a lawsuit against the company for allegedly failing to adequately protect warehouse workers From COVID-19. Several states have passed legislation granting essential workers who contracted the coronavirus presumption status under Workers’ Compensation.

As the state and federal court systems begin to open and address the backlog of cases, casualty carriers will again be faced with verdicts and settlements involving GOT exposures (Glyphosate, opioids & talc) each which may cost billions – with plenty of other emerging issues developing in the wings.

It does seem the Property/Casualty insurance industry, at least for the foreseeable future, is living through interesting times.

About Charlie Kingdollar

Retired Vice President and Emerging Issues Officer at Gen Re

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