Hiscox told shareholders that it expected to pay out $150 million to settle claims including for the cancellation of events if the social distancing measures and travel bans that began in March last for six months.
The bill would rise by a further $25 million if the restrictions lasted longer, it added.
Beazley estimated that total claims relating from the pandemic would reach $170 million net of reinsurance and warned that its investment portfolio had suffered a $55 million loss from the market rout caused by the coronavirus pandemic.
The insurance industry is expected to be dealt a major blow from the crisis. As well as significant financial pain from claims ranging from health insurance to business interruption cover, insurers also risk reputational damage from angry customers when policies fail to pay out.
Hiscox however is facing a growing storm in the UK.
It has faced a backlash from small business owners in the UK in recent weeks who have been rejected when trying to claim under their business interruption policies for losses caused by the Covid-19 lockdown.
The customers argue that the wording of their policies, which says that their insured premises are covered for “an occurrence of any human infectious or human contagious disease” if the local authority is notified of the outbreak, should allow succesfful claims. They are now considering legal action against the insurer.
Hiscox has argued that the government’s social distancing measures are “not directly aimed at limiting access to an individual business’s premises, or any particular business premise” and that pandemics such as Covid-19 “are simply too large and too systemic for private insurers to cover”.
The insurer said today that it was “determined to help provide greater certainty for customers” and added: “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.”
These mechanisms are likely to include the Financial Ombudsman Service, the independent body that handles customer complaints, and taking legal action.
Hiscox has estimated that about 10,000 customers in the UK have bought business interruption policies and have been affected by the government lockdown.
