P&C Insurer Financial Health to Pay Coronavirus Claims

A recent Wall Street Journal article, These Insurers Might Resist Virus from March 20, 2020, provides some positive news about the financial health of the Property and Casualty marketplace in the context of coronavirus exposures.  It noted that S&P 500 P&C insurer stocks generally have outperformed in the recent stock market decline (YTD 29% vs. 51% decline for life insurers).  The difference may be attributable to investors’ perception that the P&C insurance industry has successfully limited pandemic and event-cancellation exposure.  For policyholders, the ironic flip side of this effort may be that the industry is financially better poised to weather an onset of coronavirus claims.  While coronavirus claims are undoubtedly a real and substantial threat, some insurers expect to otherwise see generally reduced claims activity due to the accompanying economic slowdown.  The industry’s biggest threat may not be from claims, but from coronavirus-related financial losses due to plummeting interest rates, investment portfolio losses and credit risk.  Overall, while coronavirus cannot be considered positive for insurers, it may be less of a financial burden to the insurance industry generally than first imagined.  As for policyholders, their respective financial futures are perhaps less clear.  The only certainty in a crisis of this magnitude is that there is no certainty.