February 5, 2020 / 8:39 PM / 19 days ago

Coronavirus-related risk low for U.S. life and health insurers

New York(Thomson Reuters Regulatory Intelligence) - The U.S. insurance industry is closely watching the spread of the coronavirus 2019-nCoV in China but it is too early to tell if its occurrence in the U.S. mainland will evolve into a major risk for domestic life and health insurers, experts said.

A doctor puts on protective goggles before entering the isolation ward at a hospital, following the outbreak of a new coronavirus in Wuhan, Hubei province, China January 30, 2020.

The Trump administration has declared the coronavirus outbreak as a public health emergency and has implemented precautionary measures to contain its spread{here}.

The U.S. Department of Health and Human Services (HHS) made the announcement about the deadly virus a day after the World Health Organisation declared the outbreak a “Pandemic Health Emergency of International Concern” on Jan 30. The HHS is now making more than $250 million available in emergency funds to cover the cost of the response.

Although health insurers normally incorporate mortality risk associated with seasonal influenza into their premium rates, they do not typically incorporate an expectation for epidemics or pandemics.

Rating agency Fitch said it does not currently anticipate the arrival of 2019-nCoV in the United States to significantly affect the credit profile of the domestic health insurance sector. Such an outcome would be similar to that of the last two pandemics - the Severe Acute Respiratory Syndrome (SARS) and the Middle Eastern Respiratory Syndrome (MERS).

Both SARS, in 2003, and MERS, in 2012, which together resulted in over 1,500 deaths worldwide and had infected over 10,000 people globally, had minimal spread and no fatalities in the United States where the disease was met with containment efforts by public health officials.

There have been 11 confirmed cases of people carrying the 2019-nCoV in the United States, while 82 more people remain under investigation as of Feb. 3, according to the CDC{here}. More cases of human transmission are expected to surface over the next few days but all those affected are being quarantined and treated.

Little detail is now available on the cost of treating the illness and the severity of associated symptoms. Fitch said it will closely monitor the progress of 2019-nCoV, given its rapid transmission.

Life insurers with a mortality focus would be at greatest risk if the spread accelerates, Fitch said in a separate note.

“To-date, 2019-nCoV has not caused any deaths in the U.S. However, any event that might cause an increase in the U.S. mortality rate has the potential to be a negative credit event for U.S. life insurers in a severe scenario,” Donald Thorpe, Senior Director of Insurance Ratings, said in the note.

The American Council of Life Insurers maintained that the industry’s capital reserves will help it cope with a potential health crisis with large volumes of claims. Assets of U.S. life insurers were $7 trillion in 2018, down 2.7 percent from the year before.

“How far the coronavirus outbreak will reach remains unknown, but life insurers are prepared to meet their commitments to policyholders,” council spokesman Whit Cornman said.

The HHS has partnered with a New York-based biotech company, Regeneron to develop a treatment. Travel to and from China has been restricted after cases of human-to-human transmission were confirmed.

*To read more by the Thomson Reuters Regulatory Intelligence team click here: bit.ly/TR-RegIntel

(By Antonita Madonna in New York, Regulatory Intelligence)

This article was produced by Thomson Reuters Regulatory Intelligence - bit.ly/TR-RegIntel - and initially posted on Feb. 5. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters

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