Triple-I: Policyholders’ Surplus Set Aside to Pay Covered Claims

Rewriting Existing Business Interruption Contracts for This Pandemic Would Cause Irreparable Harm to P/C Insurance Industry


For immediate release
New York Press Office: (917) 923-8245;


NEW YORK, April 16, 2020 —In its second public economic briefing related to COVID-19, the Insurance Information Institute (Triple-I) today offered clarity and understanding in terms of the economic impact for the industry; how the industry surplus works for covered claims; and how any attempt to retroactively apply this pandemic to business interruption insurance policies would cause irreparable harm to the financial stability of the property-casualty (P/C) insurance industry. 

“Like anything in this world there are limits, and one limit for insurance is that it has never been able to offer a policy in a widely available manner what we are experiencing now – a pandemic,” said Sean Kevelighan, CEO, Triple-I. “What we are experiencing economically is unprecedented as it is impacting every single state, and all of the economies within are being negatively impacted – at the same time. With that type of impact, it is not possible to offer insurance, and for this reason pandemics are not included in standard policies. For times like these, it is essential that we look to the government for assistance. Thankfully, the United States government has and continues to present financial relief for Americans.

“For its part, insurance is doing what it can for customers, offering immediate and forward-looking solutions, including payment relief and refunds for auto insurance premiums that to date add up to more than $10 billion. And the industry remains well-employed, so it can continue to serve customers, as there are other covered catastrophes happening and more to come in the form of tornados, hurricanes, wildfires and floods. You may have heard us before say insurance acts as financial or economic first responders. It is critical that we maintain the integrity of our business model, which has been designed hand-in-hand with the regulatory community,” Kevelighan stated.

“Insurers price their policies for expected claims, with additional monies set aside for unexpected claims, such as those which are filed during exceptionally severe hurricane seasons,” said Dr. Steven Weisbart, senior vice president and chief economist, Triple-I, citing 2017, when Hurricanes Harvey, Irma, and Maria caused tens of billions of dollars in insured losses in the U.S. “The policyholders’ surplus backs up every line of insurance each insurer writes. It is calculated as assets, minus liabilities, and rises and falls due to changes in asset values.” 

A few state and federal lawmakers have identified the policyholders’ surplus as a potential source of funds for closed businesses during the COVID-19 crisis, with the monies being disbursed after existing insurance policies are retroactively rewritten to allow claim payouts. The industry’s policyholders’ surplus stood at $812 billion as of Sept. 30, 2019 and dropped significantly since then.  The industry, if it were a single entity, would need a policyholders’ surplus of at least $400 billion to meet minimum regulatory standards, according to Weisbart. 

“If insurers nationwide had to pay business interruption policy claims for which insurers collected no premium, it could cost the industry each month anywhere from roughly $150 billion to nearly as high as $380 billion,” said Dr. Michel Léonard, vice president and senior economist, Triple-I, noting the smaller amount accounted for the U.S.’s small and medium-size businesses that currently have business interruption coverage and the larger amount includes those who do not. “Pandemic-caused losses are excluded from standard business interruption policies because they impact all businesses, all at the same time.”  

A standard business interruption policy, subject to review by state insurance regulators, typically covers a business when it incurs direct physical damage due to a covered loss, such as a windstorm or a fire. A business interruption policy generally pays a closed business’s payroll, rent, and lost profits.

Beyond health insurance, the lines of insurance with the most exposure to COVID-19 are workers compensation, liability, and directors & officers, the Triple-I’s economists stated.

Auto, home, and business insurer profits have historically been made through their investment income as opposed to underwriting. Most of this income comes from investments in high-quality corporate and municipal bonds, which account for slightly over 60 percent of U.S. insurers’ total invested assets.


Triple-I Fact Sheet: Understanding Business Interruption Insurance and Pandemics
Triple-I Presentation: The Impact of COVID-19 On P/C Insurance
Triple-I Publication: A Firm Foundation: How Insurance Supports the Economy
Triple-I Article: Coronavirus: Issues and Impacts
Triple-I Blog: COVID-19: Learning From HistoryCOVID-19: A Teachable Moment for Thinking About Risk 

The I.I.I. has a full library of educational videos on its YouTube Channel. Information about I.I.I. mobile apps can be found here.


Insurance Information Institute, 110 William Street, New York, NY 10038; (212) 346-5500;

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