Business Interruption Claims From COVID-19 Could Bankrupt The Insurance Industry

Apr. 20, 2020 12:09 PM ETAIG, ALL, CB, HIG, TRV19 Comments
Gloria Vogel, CFA profile picture
Gloria Vogel, CFA


  • Pandemics have been with humanity since ancient times.
  • The P&C industry has $860B capital and surplus – making it a good target for regulators and clients.
  • Small firms seeking survival will look to Business Interruption Insurance coverage for help.
  • Business Interruption claims will likely rise – perhaps from mandated retrospective coverage.
  • Policy language is subject to interpretation – few firms have insurance that covers pandemics.

History of Pandemics

Pandemics have been with humanity over many centuries. Excluding ancient times, recorded major pandemics occurred in 430 B.C – The Plague of Athens, with other epidemics following:

430 BC Plague of Athens; 165 A.D. Antonine Plague; 250 A.D. Plague of Cyprian;

540 Plague of Justinian; 1350 Black Death (Bubonic Plague); 1665 Great Plague of London;

1817 First Cholera Pandemic; 1855 Third Plague Pandemic; 1875 Fiji Measles Pandemic;

1889 Russian Flu; 1918 Spanish Flu; 1957: Asian Flu; 1968 Hong Kong Flu;

1981 AIDS; 2003 SARS; 2009 Swine Flu – H1N1; 2020 COVID-19 Flu.

This list doesn’t include MERS, Zika, or Ebola breakouts in more recent years nor the Polio epidemic in the early 1900s. It also doesn’t include a major outbreak of yellow fever in the late 1690s and again in late summer of 1793.

Malaria, another ancient disease is referenced in Chinese documents from about 2700 BC, clay tablets from Mesopotamia from 2000 BC, Egyptian papyri from 1570 BC and Hindu texts as far back as the sixth century BC. The first recognized dengue epidemics occurred almost simultaneously in Asia, Africa, and North America in the 1780s, shortly after the identification and naming of the disease in 1779.

In other words, pandemics have regularly occurred since ancient times.

Somehow humanity has come through those episodes, but only after many deaths. Also, many changes resulted following those episodes – new methodologies of treatments, vaccines, business models, regulations, etc. This time will be no different.

Insurance Industry Strength

P&C insurers have strong balance sheets with capital and surplus totaling an estimated $860 billion at year-end 2019 and with loss reserves totaling about $556 billion. It is estimated that COVID-19 claims could wipe out this industry surplus, leaving few funds left to pay other claims.

Business interruption losses for U.S. small

This article was written by

Gloria Vogel, CFA profile picture
Gloria Vogel is currently Managing Director at Vogel Capital Management, an investment and consulting firm based in New York City. She is also on the Board of Jumptuit Insurance, a technology firm offering streaming data of relevant information to specific industry sectors. She has been an Adjunct Professor at NYU-SPS, and has also taught in the CPCU program. Gloria is a financial analyst who has been a consultant with many years of experience following the insurance sector. She was the U.S. investor relations contact at Swiss Re, where she also performed credit analysis on insurer counter-party risks, and reviewed private equity/venture capital investments. Earlier, she was an All-Star equity research insurance analyst at several major Wall Street investment banks.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (19)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.