International Finance

Chinese insurers face risk from selling Covid-19 cover: Fitch

Chinese insurers Cover-19
The sale of cover could pose risks to property and casualty insurers' underwriting stability

Domestic insurers in China may face unintended consequences on the back of selling cover to Chinese companies affected by the Covid-19 pandemic. It is reported that the sale of cover could pose risks to property and casualty insurers’ underwriting stability, according to a report published by Fitch Ratings.

The Fitch report noted that the potential risks can be attributed to limited accuracy of historical data points. This factor in turn is making it difficult for insurers to price the products appropriately. That said, these products are being purchased quickly in the market, the report said.

The report said, “There are maximum limits that each insured enterprise can claim if the infection occurs after employees return to work. The features of the insurance vary by product and region, but they mainly provide coverage against two kinds of risks – liability for an employee’s illness and death, and risks related to business interruption associated with property shutdowns due to infection.”

Fitch further explained that these insurance products largely cover quarantine costs, staff salaries, housing rental, cash flow disruptions and refinancing difficulties due to the pandemic. The insurance products offered in some parts of the region limit the number of insured policies being offered to reduce the overall risk exposure.

According to the Insurance Association of China, 68 Chinese insurers have launched Cover-19 related products since end of last year. Also, it seems that the majority of domestic businesses did not purchase business-interruption insurance prior to the pandemic, the report said. Fitch has reported that RTW Insurance products will remain in demand in short-term as the Cover-19 situation continues.

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