Four months ago, I wrote a piece focusing on the possible impacts of COVID-19, noting the 85,000 cases and 2,500 deaths that had occurred at the time. Those numbers sounded bad but pale compared to the 6.9 million cases and 400,000 deaths across the globe at the time of writing, with the accompanying loss of jobs and financial hardships from which it will take years to recover.
What isn’t reported so widely is that globally, the insurance industry will take an estimated $300bn (NZD) hit from this crisis according to Lloyds of London CEO John Neal. As a comparison, the Christchurch earthquake and the 9/11 WTC attacks each resulted in about $30bn of insured losses.
Around half of that comes from claims that will need to be paid out – mainly event cancellation, business interruption and trade credit cover. Whilst many policies exclude losses due to pandemics, particularly once this became a “known event” in late January, many major events such as the Wimbledon tennis tournament do include pandemic cover ($240m claim alone) and the International Olympics Committee has just lodged a claim for the cancelled Tokyo Olympics that some observers suggest could be north of $500m. Some of these major losses will be claimed against Lloyds and reinsurers, depending on the nature of each insurer's reinsurance programme, but many of the smaller claims will be borne by insurers themselves.
It’s often said that insurers are in the business of paying claims – that’s why people buy insurance, but the double blow for the industry is that much of its operating revenue comes from the return on investments of its funds. With stock markets globally taking a battering, those returns have fallen significantly with some insurers reporting pre-tax losses which will likely result in a lean year for insurers' balance sheets.
Thankfully, global pandemics of this nature are a once in a lifetime event, but looking closer to home, recent shakes in the Wellington Region and the recently announced loss of $20m from the Otago floods in February remind us that we are surrounded by risk. Whilst we think of ourselves as the “Shaky Isles”, it’s actually flooding that is the number one hazard in terms of frequency, losses and civil defence emergencies according to the Ministry of Civil Defence. Anyone in the Coromandel over Queen's Birthday weekend might agree!
But despite the risk posed by flood, New Zealand hasn't had a high resolution, nationwide flood model until now. CoreLogic is pleased to have partnered with global flood specialists Ambiental to bring NZ FloodMap and NZ FloodScore to the market. Providing the most complete view of flood risk across the country, these datasets allow property level decision making for any business that needs to understand flood risk around its insured, securitised or owned assets. Find out more about NZ FloodMap and NZ FloodScore by reading this excellent article by Ambiental's Paul Drury or getting in contact with us today.