Aviva estimates Covid-19 impact on specialist schemes and brokers as related BI claims reach £200m

Insurer Aviva has estimated that business interruption (BI) claims related to the Covid-19 pandemic will amount to around £200m across its global general insurance portfolio, net of reinsurance.

Announced within the firm’s latest trading update, published today, Aviva added that based on analysis as at 31 April, its estimation of coronavirus-related claims across its entire GI business – including notified and projected claims – totals £160m net of reinsurance.

The insurer’s Q1 update, while acknowledging the current economic uncertainty, predicted a Covid-19 claims impact across its travel, surety, construction and other commercial lines as well as within specialist schemes or broker programmes pertaining to business interruption – the insurer has also allowed for favourable impacts across its other product lines.

Early Q2 trends show a decline in new business sales, which Aviva attributes to the government’s lockdown measures, designed to quell the spread of coronavirus.

These are likely to remain below expectations for the year, despite a recent uptick in customer activity.

Quarter one results

Aviva’s global general insurance net written premium (NWP) grew by 3% compared to 2019’s Q1, rising from £2.3bn to £2.4bn.

Excluding the coronavirus crisis, the UK’s figures are further adversely affected by February’s storms and the corresponding damage, which Aviva puts at around £70m.

In the UK specifically, NWP increased by 1% compared to 2019, reaching £1bn.

The trading update confirmed that Aviva is proactively aiming to evolve the business mix of its GI portfolio; growth in SME and GCS creating a 9% increase in commercial lines volumes, offset by lower premiums in intermediated personal lines.

At 31 March, the firm’s solvency II cover ratio was 182%, reflecting Covid-19 impacts. This compares to a 206% solvency II cover ratio recorded for this period in 2019.

Aviva’s holding company liquidity at 30 April was £2.5bn.

To mitigate the effects of Covid-19 on the business, Aviva has:

• Allowed for a range of coronavirus impacts within its general insurance arm.
• Updated its UK property assumptions – Brexit property allowance has been released, 15% fall in commercial property and a 12% fall in residential property followed by long-term growth.
• Adjustment for potential future credit rating downgrades.

‘Well positioned’

Maurice Tulloch, group chief executive at Aviva, said: “In responding to Covid-19, Aviva moved quickly to support our customers, introducing a range of measures to help, including financial assistance.

“I am proud of how Aviva’s people have adapted and maintained excellent day-to-day service for our customers when they need us most.

“Aviva had a solid first quarter of trading.

“The economic outlook remains uncertain and will affect our business, however the strength of our capital and liquidity means we are well positioned to manage this crisis and continue to support our customers.”