Navigating the Economic Fallout of COVID-19: Insights from Triple-I's Chief Actuary

The Pandemic's Impact on the Property/Casualty Insurance Industry

The COVID-19 pandemic has significantly affected nearly every aspect of the property/casualty (P/C) insurance value chain. However, according to James Lynch, Triple-I's chief actuary, the industry has managed to weather the storm remarkably well. At the Casualty Actuarial Society's (CAS) virtual annual meeting on November 10, Lynch highlighted how U.S. P/C insurers not only provided premium relief and retained employees but also navigated a capital market downturn amidst the pandemic.

Premium Relief and Employment Retention

Private-passenger auto insurers returned approximately $14 billion in premiums to drivers as miles driven plummeted in the early months of the pandemic. This led to a five percent reduction in the cost of auto insurance for the typical driver in 2020 compared to 2019. Simultaneously, auto, home, and business insurers continued to employ over two million Americans, responding to numerous natural disasters and the aftermath of civil unrest.

Insured Losses and Policyholders' Surplus

This year's record-setting hurricanes and wildfires, along with civil disorders in multiple states, have resulted in insured loss payouts totaling tens of billions of dollars. Despite these challenges, the policyholders' surplus stood at $826 billion as of June 30, 2020, down from a record-high $848 billion as of December 31, 2019. The economic uncertainty in the U.S. capital markets in 2020's first quarter caused unrealized capital losses in insurer investment portfolios. Insurers facing lawsuits related to pandemic-caused losses also had to navigate financial challenges in defending themselves.

For readers, it's crucial to understand the complexities of business interruption insurance and how it generally only covers direct physical damage to a business's property. Staying informed about industry trends and legislative actions can help in making informed decisions about insurance coverage.