Allianz CEO calls for 'clear standards' on coverage after lack of clarity

The insurance industry need to have "very clear standards" on explaining what is and is not covered in policies following high profile disputes on coronavirus-related business interruption coverage, Allianz SE CEO Oliver Bäte has said.

Speaking to journalists about Allianz's full-year 2020 earnings, Bäte said it "should not surprise anybody" that the industry has neither the know-how or capacity to cover government-ordered business closures in a pandemic, "but we shouldn't be so stupid to give the image that we should play a role in doing that."

He added that if companies wanted to continue to "roll the dice" on coverage clarity and head to court when claims come in, "I don't think that will help the image of our industry." "I think that is what we should learn from the corona crisis at least," he added.

Bäte said the industry has "a long way ahead of us" to clarify coverage, and that while work had begun in retail insurance, "we have to bring it to commercial." The aim is to arrive at "something that you can interpret without a lawyer and you don't need to go to court to get clarification."

He added that "almost all the problems" the U.K. industry has had with business interruption wordings came from "very specific wordings that some brokers have invented and we were stupid enough to underwrite."

In January, the U.K. Supreme Court found largely in favor of policyholders in a test-case designed to clear up disputes about coronavirus-related business interruption cover. Ireland's high court similarly ruled in favor of four pubs pursuing FBD Holdings PLC for coronavirus-related business interruption payouts early in February.

Allianz reported a 14% drop in net income attributable to shareholders to €6.81 billion in 2020 from €7.91 billion in 2019, largely because of a €1.3 billion hit from the coronavirus pandemic. Of this, €1.1 billion came from the company's property and casualty insurance segment.

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Allianz CFO Giulio Terzariol told journalists that the company is expecting an additional coronavirus impact of around €300 million in 2021 on the P&C side. This includes a €250 million combined hit across the Allianz Partners and Euler Hermes divisions, which write travel insurance and trade credit insurance respectively. Allianz is also expecting an impact of between €50 million and €100 million at its Allianz Global Corporate & Specialty division, or AGCS, which covers multinational corporations.

While there might be further negative development in business interruption, Terzariol said that this could be offset by benefits from lower claims frequency in other areas, and so the company is expecting a "relatively neutral" coronavirus impact in 2021 outside Allianz Partners, Euler Hermes and AGCS. He added that 2021 would be "definitely way, way better" than 2020.

Allianz has kept its group midpoint operating profit target at €12 billion for 2021. The company reported an operating profit of €10.8 billion for 2020.