Authored by Hiscox Limited:
Acknowledging there remains material uncertainty due to the unprecedented events that are currently unfolding, Hiscox has conducted further analysis of its potential exposure to the COVID-19 pandemic and provides an update.
Hiscox is actively settling claims for event cancellation and abandonment, media and entertainment and other segments including travel. On the basis that disruption caused by restrictions on travel and mass gatherings continues for a six-month period from March 2020, Hiscox expects to pay net claims totalling up to $150 million. In the event that restrictions on travel and mass gatherings are extended beyond six months, Hiscox expects that these claims could increase by an additional $25 million.
Hiscox is also receiving claims as a result of economic losses following government action to stop the spread of COVID-19. Like others in the industry, Hiscox UK’s core small commercial package policies do not provide cover for business interruption as a result of the general measures taken by the UK government in response to a pandemic.
As described in its announcement on 15 April, Hiscox UK has approximately 10,000 customers that purchased cover for business interruption and have been directly impacted by mandated government premises closure to stop the spread of COVID-19. Over 70% of these customers have monthly revenues of less than £40,000 in a normal trading environment, with a significant proportion below £10,000 per month. The level of economic loss experienced is likely to be materially lower than reported revenues.
A number of UK policyholders have disputed the application of their policy in relation to business interruption. Hiscox recognises these are extremely difficult times for businesses and is determined to help provide greater certainty for customers. As a priority it will therefore work with the UK insurance industry, its regulators and its customers to seek means of expediting resolution through the range of independent mechanisms available.
Hiscox believes its business interruption exposure to COVID-19 is limited in Hiscox Europe and it has negligible exposure in Hiscox USA.
Hiscox UK and Hiscox Europe have a substantial catastrophe reinsurance programme.
Hiscox’s capital, liquidity and funding positions remain robust and the Group remains operationally strong in the face of unprecedented global uncertainty presented by the COVID-19 pandemic. Hiscox expects this uncertainty and consequent capital contraction to influence rates across wholesale and reinsurance markets.