May 7, 2020 / 1:19 PM / 20 days ago

Forcing insurance pay outs in pandemic could hit financial stability - IAIS

LONDON, May 7 (Reuters) - Forcing insurers to retroactively cover business disruption losses from the pandemic could ultimately put financial stability at risk, the International Association of Insurance Supervisors (IAIS) said on Thursday.

Battles over policy cover for businesses struggling to stay afloat during the coronavirus pandemic that has led to national lockdowns have erupted in countries like the United States and Britain.

Eight U.S. states have introduced legislation which would require insurers to pay claims, mainly to small businesses, despite exclusions.

Where pandemic risks are covered by a policy, insurers should pay out such claims in a prompt and efficient manner, the IAIS said in a statement.

“At the same time, the IAIS cautions against initiatives seeking to require insurers to retroactively cover Covid-19 related losses, such as business interruption, that are specifically excluded in existing insurance contracts,” it said.

“Such initiatives could ultimately threaten policyholder protection and financial stability, further aggravating the financial and economic impacts of Covid-19.”

Reporting by Huw Jones; editing by Carolyn Cohn

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