Impact of COVID-19 on the Insurance Industry Starts Here

Columbus, Ohio, April 2, 2020: The COVID-19 pandemic and the historic federal, state, and local government efforts to mitigate its spread has stopped the economy in its tracks. The unemployment rate in the US may reach record levels. In the insurance industry, some discussion focuses on the response of business interruption insurers. The dialogue will likely continue in court or in the discussion of a federal backstop. However, at the forefront of the emerging issue of unemployment and creditworthiness of businesses under stress is credit insurance and the carriers who write it.

As of December 31, 2019, there were 102 insurers that reported direct premium written for the credit insurance line of business. There are various types of credit insurance, including credit life and credit disability insurance; however, the insurers that wrote credit unemployment insurance will see a rise in claim frequency and severity as a result of the unemployment associated with the effort to mitigate COVID-19 in the first and second quarters of 2020.

Direct premium written (DPW) for credit insurance for the 102 insurers was $2.2 billion at yearend 2019. The top 20 writers, based on all types of credit insurance written, accounted for over $1.9 billion, 86 percent of the dollar volume. Credit insurance comprised approximately 7 percent of these top 20 insurers’ books of business. Hopefully, this implies adequate diversification that enables the carriers to manage the unanticipated increase in exposure from COVID-19.

Despite the diversification within many of the top 20, credit insurance constituted more than 95 percent of three insurers’ total 2019 DPW. According to Joseph L. Petrelli, President and cofounder, Demotech, the first company to review and rate independent regional and specialty insurers, “By count, the 102 carriers writing credit insurance are nearly 4% of the Property and Casualty insurers reporting to the National Association of Insurance Commissioners. The legacy rating agencies seem to prefer to focus on how ‘every insurer’ might be impacted by COVID-19, yet, there are 102 insurers that are likely to be on the front line of the industry’s response. With respect to the impact of COVID-19 on insurers, Demotech’s response is and will remain focused and fair. A shotgun approach serves no one.”

A full article along with a chart of the top 20 writers of Credit Insurance by 2019 DPW can be found here.

About Demotech, Inc.

Demotech, Inc. is a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers. Since 1985, Demotech has served the insurance industry by assigning accurate, reliable, and proven Financial Stability Ratings® (FSRs) for Property & Casualty insurers and Title underwriters. FSRs are a leading indicator of financial stability, providing an objective baseline of the future solvency of an insurer. Demotech’s philosophy is to review and evaluate insurers based on their area of focus and execution of their business model rather than solely on financial size. Visit for more information.