Coronavirus: a crash test for the Chinese insurance business

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Many pandemics such as AIDS, Ebola, foot-and-mouth disease and avian flu have broken out in recent years. The novelty, in 2020 the virus hit a country with 1.4 billion inhabitants. On a worldwide scale China accounts for 20% of GDP. It is the second economic power, the real driving force of global growth.

The Chinese insurance market is the first to be concerned with the health crisis and its repercussions on local economy. The 2020 insurers’ turnover has already been impacted by factory closures, slowing exports, decline of tourism and travel restrictions imposed on the population. Health insurance has come under pressure while the financial market is poised to sustain some disruptions with a decline in stock market shares that would inevitably strain the financial soundness of Chinese insurance companies.

Global insurance will also be affected by the fallout of the Coronavirus. At the level of personal line risks, policies pertaining to travel cancellation and health largely exclude epidemic risks, hence, the probable increase of insurer-insured litigations. The only consolation left for personal insurance consists in guarantees tied to use of credit cards. Death insurance policies, irrespective of causes are not concerned with the crisis.

At the corporate level, the impact of the epidemic mainly affects disruptions of supply chains and business interruption cover. The latter is provided only after the occurrence of a material damage claim. For the current case, only a specific policy covering business interruption, due to transmissible disease, could result in compensation.

Marine and reinsurance classes of business are equally penalized by the slowdown of the Chinese economy, with declining premium volumes.

Atlas Magazine N°168, February 2020 [1]