COVID-19 BI losses for small businesses dwarfs annual property premiums: APCIA

Business interruption losses for small businesses due to the coronavirus lockdown and closures could reach $431 billion a month, which is approximately 72 times the monthly commercial property insurance premiums, according to the American Property Casualty Insurance Association (APCIA).

David Sampson, president and CEO of APCIA, has warned that retroactively mandating insurers to cover COVID-19 business interruption losses by voiding exclusions would threaten insurer's ability to pay claims at the time of natural catastrophes.

“Many commercial insurance policies, including those that have business interruption coverage, do not provide coverage for communicable diseases or viruses such as COVID-19," said Sampson. "Pandemic outbreaks are uninsured because they are uninsurable."

Sampson noted that “action to fundamentally alter business interruption provisions specifically, or property insurance generally, to retroactively mandate insurance coverage for viruses by voiding those exclusions, would immediately subject insurers to claim payment liability that threatens solvency and the ability to make good on the actual promises made in existing insurance policies."

APCIA estimates that closure losses just for the small businesses with 100 or fewer employees has increased to $255 billion to $431 billion per month. These numbers dwarf the annual premiums for all commercial property risks in the key insurance lines of $71 billion per year, or about $6 billion a month.

“Continuity losses for small businesses are approximately 43 to 72 times the monthly commercial property insurance premiums, which includes coverage for losses as a result of such perils as fire, wind, hail, and water leaks.

“The total surplus for all of the US home, auto, and business insurers combined to pay all future losses is roughly only $800 billion, with the combined capital of the top business insurance underwriters representing only a fraction of that amount."

The association noted that "insurance stability is especially important in a time of increased natural catastrophes", especially as spring flooding season is underway, hurricane season is around the corner, and wildfires pose a threat year-round.

APCIA said it supports the federal assistance programmes that deliver aid directly to vulnerable business communities, particularly affected small businesses.

Earlier this week, insurers joined a broad coalition to advance the COVID-19 Business and Employee Continuity Fund.