Losses in the property/casualty insurance industry could top $100 billion from the COVID-19 pandemic, with workers compensation driving the losses more than other lines, according to a risk analysis of the insurance industry that Wells Fargo & Co. released Thursday.
Workers compensation may be reaching an inflection, as the line is continuing to generate less rate than other property/casualty lines.
Despite continued strong profitability, workers comp rates remained flat for the first time since March 2019, the report said. Comp could see COVID-19 claims losses of $17 billion to $34 billion, it said.
Several factors will determine the impact COVID-19 has on the line overall, including the total number of cases and deaths, the percentage of cases that result in workers compensation claims and the severity of those cases.
Wells Fargo analysts forecast total deaths from COVID-19 of 120,000 to 150,000, with total cases of about 2.3 million. They estimate that about a quarter of those cases will result in workers compensation claims, with 11% of those being severe, 3% being critical cases, and 5% resulting in death.
The analysts predict that if a recession occurs, workers compensation — which is the only line where rates are declining — may see an uptick in claims.
The report estimates that business interruption losses from the pandemic of $4 billion to $24 billion. Event cancellation will represent nearly 30% of industry losses and credit lines about 10%, based on loss breakdowns from Lloyd’s of London, it said.
Other property/casualty losses that could be attributed to COVID-19 include losses associated with travel insurance, directors and officers liability, and discretionary purchases.
The report noted that lower losses in commercial auto lines may favorably offset some of the COVID-19-related losses.
This article was first published by Business Insurance