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Business interruption claims concerns ‘overblown’: Morgan Stanley

Morgan Stanley

Concerns that property/casualty insurers will be forced to pick up the tab for business interruption COVID-19 losses are “overblown,” Morgan Stanley analysts said Wednesday.

The upbeat outlook on the P/C sector came as Louisiana lawmakers became the latest to introduce bills that would force insurers to retroactively cover business interruption claims due to COVID-19.

Recent moves by New York, Ohio, New Jersey and Massachusetts to push P/C insurers to cover business interruption losses have intensified concerns amid widespread shutdowns across the economy due to the pandemic, New York-based Morgan Stanley analysts said in a report.

However, P/C insurers are “largely insulated” from these losses, and covered losses are likely to be limited to a few select lines of business, Morgan Stanley said.

“We remind that language in commercial property policies is clear on requiring physical property damage from a covered peril to trigger a BI claim, and pandemic coverage is also usually excluded from standard policies,” the report said.

“We expect any losses to be manageable,” Morgan Stanley said, adding that it expects P/C insurers to outperform other financials in a recessionary environment especially due to constraints on coronavirus-related losses.

On Tuesday Louisiana State Sen. Rick Ward introduced S.B. 477, while Rep. Royce Duplessis introduced H.B. 858, both of which call for insurers doing business in the state to retroactively cover business interruption claims due to the pandemic.

The bills would apply to insurance policies in force by March 11.

More insurance and risk management news on the coronavirus crisis here.