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Apr 28, 2020

Comments on COVID losses from Hyperion Ins Group analyst David Flandro

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We thought it would be interesting to report the remarks of David Flandro, the highly respected Head of Analytics of Hyperion, an international insurance broking firm, as made in a call to Morgan Stanley's analysts earlier this month*, saying that he thought it was difficult to see how the event [COVID-19] could approach the size of the 2017 hurricanes Harvey, Irma and Maria and he went on to say that in the absence of government intervention, COVID-19 will be a manageable impact for the insurance industry. Hyperion group comprises among others the firms Howden, RKH and Dual.

David Flandro commented further "When we look at exposures in all lines including CBI, Event Cancellation, Mtge [Mortgage], Travel, Airline, PI / D&O / E&O, Energy, Surety, Trade Credit, not to mention LA&H [LIfe Accident and Health], it is still difficult to get to anything like a major cat loss year such as 2011 (USD 135 billion) or 2017 (USD 150 billion). He made the relevant caveat that "all bets are off if governments intervene and require insurers to interpret wordings differently on a retroactive basis."

David Flandro also said in his call that the better capitalised (re)insurers will be able to take advantage of market dislocations to grow in some lines of business, while those less well-capitalised will have to focus on protecting their assets at this time.

Early in April, Morgan Stanley’s own analysts took the view in a paper to their clients* that covered losses are likely to be limited to a few select lines of business, and Morgan Stanley observed “We expect any losses to be manageable,” and that property/casualty insurance companies are “largely insulated” from these losses, and covered losses are likely to be limited to a few select lines of business. “We remind that language in commercial property policies is clear on requiring physical property damage from a covered peril to trigger a BI claim, and pandemic coverage is also usually excluded from standard policies,” the report said.

However, in relation to BI claims, the language of each and every property policy is crucial as the flow chart available here published in The National Law Review shows.

*as reported by Artemis.bm

*as reported by Business Insurance