The far-reaching ramifications of the coronavirus (COVID-19) pandemic are making themselves clearer day by day, and it is evident that we are just at the beginning of a long period of severe disruption.
The travel insurance market has been among the first to be hit, but we expect to see a downturn across other sectors from hospitality, events to fleet (haulage and taxi), as the movement of people and goods grinds to a halt.
Travel insurers had already been bracing themselves for an onslaught of claims. Now, several travel insurance providers have announced they will withdraw from the market and exclude coverage on future policies. LV= was the first insurer to announce it would stop selling all travel insurance policies on the March 11. Aviva and Insureandgo, among others, soon followed suit.
Coronavirus and travel insurance - the double whammy
This double whammy of a decrease in revenues and an increase in claims will take its toll on the sector for both carriers and intermediaries alike. Not only will it affect the financial stability and viability of the insurers and intermediaries themselves, what does it mean for the lenders into these institutions or the private equity (PE) funds that own many of them?
How long will this situation last? At this point, no-one can know. Lenders and PE funds should assess their exposure to the insurance sector, stress test for multiple financial scenarios and, most importantly, keep the lines of communication with intermediaries open in order to best prepare to weather continued market disruption.