Pandemic: the black swan risk The unfolding, unprecedented story of the COVID-19 outbreak and its impact on insurance so far By John Deex
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he coronavirus pandemic is moving fast – extremely fast – and what we know now will be quickly overtaken by new threats and new strategies to meet them. By the time this article is read, the 693,244 cases and 33,106 deaths worldwide will have increased significantly. The Chinese city of Wuhan, where this all started in December last year, might have returned to normality. Italy may be over the worst, but another country will have taken over as the epicentre of the outbreak. Many consider this pandemic a “black swan” – a high impact, unforeseen event on a par with 9/11. Others say it should have been entirely predictable, and it must be admitted that insurance policies, at least, were prepared for such an incalculable risk. What we do know already, and what isn’t going to change, is that it will have an unprecedented and lasting impact – socially, politically and economically. The economic impact will be worse than 2008’s Global Financial Crisis, and no country or sector will escape unscathed. Australia’s last recession was in 1991, but another looks unavoidable now. General insurance will likely take a significant hit, both financially and reputationally. Online Insurance News has published more than 80 stories since COVID-19 was identified, covering a huge range of impacts from cancelled local events to global industry trends. Here is our summary of the most valuable and relevant of that information, in an effort to understand the incomprehensible.
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insuranceNEWS
April/May 2020
Insurance cover It seems a long time ago, but at the start of the outbreak Australians were primarily concerned with the impact on their international travel – and how travel insurance would respond. It quickly became apparent that most insurers have either a blanket pandemic exclusion, or a “known event” exclusion, under which COVID-19 claims were kept to a minimum. All insurers take a different approach, and so consumers are always advised to “check your policy”; but chances are that cancellation isn’t covered, especially if insurance was purchased after late January. As travel restrictions tightened, there was a knockon effect on the tourism and hospitality industries. And now that all of Australia is under varying degrees of lockdown, pretty much all businesses are suffering to some extent. But business interruption policies also have pandemic exclusions. The Insurance Council of Australia (ICA) says “some specific policies may differ” but the majority are likely to contain exclusions relating to losses caused by diseases notifiable under the Quarantine Act or the Biosecurity Act. Similar restrictions apply to event cancellation. Sports events, music festivals and industry conferences have all fallen victim to the virus, but most event cancellation policies contain a communicable diseases exclusion. An extension can be written in, but now the
