Direct Line sees Coronavirus (COVID-19) travel insurance claims rise to £5m

Direct Line sees Coronavirus (COVID-19) travel insurance claims rise to £5m

Law360, London: On 18 March 2020, Direct Line said it has seen the cost of coronavirus (COVID-19) travel insurance claims rise from £1m to £5m in less than two weeks, after the Foreign Commonwealth Office advised against non-essential international travel.

Direct Line said in a London Stock Exchange update that the number of claims had risen significantly between 3–15 March 2020, and that it expects more in the coming weeks.

Direct Line stopped selling travel insurance to new customers on 13 March 2020, joining other insurers, Admiral, Aviva and LV, which suspended sales the day before. Direct Line said it expected to be hit with more claims.

Direct Line said ‘An increase in claims following further travel restrictions…is expected, although it is too early to estimate the potential impact…The group has implemented measures to help mitigate this, including pausing new travel insurance sales’.

Direct Line also said it had reinsurance cover totalling £18.5m for travel insurance claims.

A number of countries ranging from Sri Lanka to the Philippines have introduced bans on the entry of British nationals, and the UK government is warning people of travel restrictions that could be put in place at ‘short notice’.

Offsetting the losses from its travel book, Direct Line said it expected fewer claims from its motor insurance portfolio, ‘as the UK government increasingly advises against nonessential travel’. The insurer said it would also pause a £150m share buyback plan, which it said would have bolstered the company’s solvency capital ratio. So far, £29m of shares have been purchased under the program.

Direct Line said its solvency ratio remained at 163% even after allowing for the ‘effect of the recent deterioration in the financial markets on the group's investment portfolio’.

Insurers are required to keep solvency ratios of above 100%, indicating they are able to meet all their liabilities. On 18 March 2020, the European Insurance and Occupational Pensions Authority urged national regulars to remain ‘flexible’ when dealing with insurers who have seen solvency positions hit by market volatility.

This content is based on an article first published by Law360, a LexisNexis® company, on 19 March 2020 and is published with permission.

Further information can be found at: https://www.law360.com/insurance-uk (subscription required).

Related Articles:
Latest Articles: