The COVID-19 pandemic gripping the world may only trigger insured losses equivalent to a moderate natural catastrophe, Willis Towers Watson says, although plunging investment returns is a primary concern.

The broker says in a new report, The Insurance Implications of the Coronavirus Catastrophe, that some insurers’ solvency ratios are already dropping to “alarming levels.”

COVID-19 could wipe $US1.3 trillion ($2.2 trillion) from the world economy, 25 times the economic loss from the SARS outbreak in 2002-3, it says.

“For now, the main concern that insurers and reinsurers have expressed, via investor calls, have been over the reductions in the investment side of the balance sheet.”

The most notable thing about the COVID-19 pandemic from an insurance perspective might be “the magnitude of the protection gap – the proportion of the cost not refunded by insurance – as the very large majority of the economic losses from the outbreak will not be insured.”

The report lays out the different lines of insurance likely to sustain losses from the COVID-19 outbreak.

A separate article from Deloitte US insurance leader Gary Shaw says prospects for growth and profitability in insurers’ underwriting and investment portfolios will be challenged.

“Financially, insurers will likely need to adjust their budgets and implementation plans, cash flow expectations, and investment portfolios in light of recent developments.”

Property and casualty insurers tend to be most vulnerable to stock market fluctuations as they hold more liquid assets in case of catastrophic losses, Mr Shaw says.

See Analysis.