Coronavirus spreads around the globe. What began as 44 cases of pneumonia due to an unknown cause in China on Dec. 31, 2019, has exploded to more than 14,000 cases worldwide with more than 300 deaths. This map shows the total confirmed cases as of Jan. 30, 2020, with data courtesy of AIR Worldwide. (Image:

Questions about the impact of the relatively unknown coronavirus are spreading almost as quickly as the virus itself. Its origins have been traced back to a live-animal market in Wuhan, China, and the virus is believed to have started with animal to human transmission. However, subsequent cases have indicated it can also be spread from human to human through coughing, sneezing and other types of close contact.

On Jan. 30, the World Health Organization (WHO) declared the Wuhan coronavirus a "public health emergency of international concern." According to WHO on Jan. 31, the People's Republic of China had reported 7,711 confirmed cases and 12,167 suspected cases, with 170 deaths. Additional cases have been reported in more than 25 other countries outside of China since last week. As of Feb. 16, the outbreak has affected a total of 71,000 people globally with a total of 1,770 deaths.

WHO says "it is expected that further international exportation of cases may appear in any country. Thus, all countries should be prepared for containment, including active surveillance, early detection, isolation and case management, contact tracing and prevention of the onward spread of 2019-nCoV (now known as the COVID-19) infection, and to share full data with WHO."

Corporate response is swift

The response from global corporations doing business in China has been immediate, with companies such as McDonald's, Starbucks and Ikea closing stores in the Hubei province. Wuhan is the capital of the area. Law firms, like U.S.-based Baker McKenzie, which has offices in Shanghai, Beijing and Hong Kong, and other businesses like Hormel Foods Corp., are encouraging employees to work remotely for the next several weeks. In addition, firms like PricewaterhouseCoopers LLP, UBS Group AG and Goldman Sachs Group Inc. have temporarily canceled travel to Wuhan and any employees returning home from the area are expected to work from home for two weeks to ensure they do not have the virus.

Jeff Corder, vice president of loss control at AmTrust, says companies should, "Prepare for the worst and expect the best, but above all, make sure your plans are in place This a potential threat to everyone. Currently, the risk is low, so now is the time to review your plans and keep employees vigilant in health and hygiene."

Corder finds the threat to U.S.-based workers is relatively low; however, there could still be some claims that arise. "In most U.S. jurisdictions, employees whose jobs have greater potential exposure to the virus than the typical worker would have a greater likelihood of a compensable workers' compensation claim in the event of a positive coronavirus test. For instance, certain healthcare occupations would be one occupation with increased levels of exposure. However, each claim situation is based on individual merits and the differing laws of each state."

James Koelzer, a partner in the Clyde & Co. Los Angeles office finds, "The coronavirus has already led to business closures, supply chain issues, suspension of travel for business and holiday, and challenges for the health industry. It is hard to fathom the range of claims that the insurance industry might see, but coverage for many lines of insurance is triggered by physical damage to property, which I think will be hard to find in these circumstances. Overall, my feeling is the implications are so widespread that any claims to the insurance industry will depend on the specific policy language of the specific insurance product."

Travel to China has dropped significantly, and airlines are either scaling back flights or canceling them altogether. Delta Airlines, which is believed to handle approximately 90% of the airline travel from China to the U.S. has suspended flights to Shanghai and Beijing through April 30, 2020, and is issuing waivers to travelers, allowing them to change their scheduled flights without incurring a change fee. United Airlines and American Airlines have also reduced their flights between the U.S. and China, and expanded their cancellations. British Airways has canceled all flights in and out of China for an indefinite period.

Flights from China to the U.S. have also been diverted to 11cities where more in-depth health screenings will be conducted for passengers. The airports involved are Los Angeles International, San Francisco International, Honolulu International, Seattle-Tacoma International, John F. Kennedy in New York, O'Hare in Chicago, Hartsfield-Jackson International in Atlanta, Newark Liberty International airport in New Jersey, Dallas/Fort Worth International Airport in Texas and the Detroit Metropolitan Airport in Michigan.

The impact on the travel industry has probably been the most dramatic. In addition to the canceled flights, which will affect companies in the hospitality industry, cruise ships are rerouting or canceling trips. Preliminary estimates are that canceling a cruise trip could result in $3-4 million in lost revenues. In addition, the loss of revenue is also affecting stock prices for the cruise lines.

A Holland American cruise ship with almost 2,000 passengers was turned away from four ports before it was allowed to dock in Cambodia. While none of the passengers exhibited symptoms on the ship, one passenger tested positive for the virus following disembarkation. The cruise line is reimbursing passengers the full cost of the cruise, providing a credit for a future 14-day cruise and offering passengers charter flights home from Phnom Penh.

"Financial losses will be felt directly by businesses in the transport and travel sector, including hotels, airlines, cruise ships and other entities," shares Simon Oddy, a forensic accountant partner who specializes in business interruption claims at Baker Tilly. "What I would call indirect losses or downstream financial losses, will be felt by other businesses that support the travel and tourism sectors. If people are canceling travel and airlines are canceling flights, the expenditure associated with that travel will also be affected, and restaurants and other ancillary businesses like retailers and transportation companies. With airlines canceling flights, the suppliers of services to support those flights will be indirectly impacted — food service for example. There's a ripple effect with many businesses being affected to a varying degree."

The U.S., Australia and several other countries have imposed travel bans and specific quarantine measures for citizens and non-citizens arriving from China.

Since many businesses were closed for the Lunar New Year's break, the impact on manufacturers has not yet significantly affected the supply chain. In China and possibly Hong Kong, the holiday was extended for an additional week as more cases of the virus arose. However, for companies like Apple, which has nearly all of its iPhones made in China, manufacturing delays could affect sales and stock prices in the first quarter.

Oddy says that if "production in China slows, it will impact the supply chain. And if production slows because of the restrictions on travel, transportation and the impact on the labor market, this could have a knock-on effect through China and beyond." However, Oddy says whether the losses resulting from the virus' impact on business are covered by business insurance policies will very much depend on the policy in place.

With the reports of internal travel being restricted in certain towns and cities, the labor market, production and the supply chain will likely be affected, again, likely leading to financial losses.

The impacts for insurers

While some lines of insurance such as health, workers' compensation and life will most likely have covered claims; that may not be the case for those related to business interruption and travel. Whether or not a loss is covered will depend on the type of coverage purchased and the policy specifics.

"Workers' compensation is an issue if someone can prove they caught it from a coworker," explains Christine Barlow, CPCU, managing editor of Practical Insights for the National Underwriter Company and an expert for ALM's FC&S Expert Coverage Interpretation. "Business interruption comes into play generally only if there is physical damage to the property, and that is generally not the case here. Even if the government closes, most policy clauses require property damage that drove the civil authority to mandate quarantines, close offices or to restrict access."

Healthcare workers are at the greatest risk of contracting the COVID-19 virus. China's National Health Commission recently announced that 1,716 workers had contracted the virus and six had died, including the physician who first brought the dangers of the virus to the attention of the Commission.

Allianz Global Corporate & Specialty (AGCS) said in a statement to Claims Magazine last week, that "at the moment, AGCS has not been notified of any claims with regard to the coronavirus. We also consider our potential exposure to financial losses from a coronavirus pandemic to be very low and don't expect significant claims or losses."

The number of travel insurance claims will be dependent upon the policies purchased. "Each policy could have different coverages and would react differently," details James Sion, chief operating officer at Generali Global Assistance. He encourages customers to read their policies to understand what they've purchased and what is covered and to call their insurer with any specific questions.

"Most travel insurance policies cover trip cancellation and interruption," says Sion. However, coverage may also depend on where the customer is in terms of their trip. "Have you departed yet or are you in the middle of the trip? If you're in the middle of your journey and your plans are disrupted, most likely there is some coverage. Were flights missed to get back home? Are you finishing your vacation on a cruise or in a rental home? It will depend on the policy as far as what's covered."

However, Sion says that if insureds are afraid to travel because of possible exposure to the coronavirus, in all likelihood that would not be an insured loss.

Usually, when airlines suspend service or cancel flights, they will work directly with their passengers on refunds or to rebook the flights. Travel insurance generally will not cover those losses. Many airlines are offering passengers the opportunity to change their flights without the normal penalties or are offering full refunds.

For passengers submitting claims under their travel insurance, they should save receipts for meals, transportation, lodging and any other monies spent as part of the delay or cancellation. Once everything is submitted to the insurer, it generally only takes 7-10 days to settle the claim.

Sion advises travelers to avoid any non-essential travel to the affected region. "Take normal precautions – wash your hands, use disinfectant, and stay in open areas. It can be difficult to manage some aspects of exposure, but people can mitigate the risks to some extent," he adds.

Business interruption claims are another area where coverage may not apply. "While quarantines will have a huge impact on society as a whole, there's generally no insurance coverage for communicable diseases," says Barlow. "A closed border has no impact on insurance; again because there is no property damage."

Allianz agrees with that perspective. "We don't expect losses under standard property/business interruption (BI) policies as these normally can only be triggered by direct physical loss or damage," the company states.

However, the insurer says there is the potential for minor claims exposure from special extensions to property and BI policies that AGCS provides in some markets for non-damage BI scenarios such as infectious diseases. "Generally, losses under this extension would only be covered if an insured location of the client is closed due to a coronavirus outbreak at this very location."

Companies like Starbucks, McDonald's, Domino's Pizza and other firms that have closed locations due to the threats posed by the virus will most likely not have insurance coverage for their lost income or for any wages they continue to pay their employees while the businesses are shut down.

Another line of insurance that could be affected involves contingency or event cancellation within an insurer's entertainment line of business. AGCS says that coverage for this type of claim is generally restricted to the necessary cancellation of an event by order of a government authority.

Since this is still a developing situation, the final outcomes from the coronavirus are difficult to predict, however, insurers should be aware of how claims from these global events will affect their various lines of business and prepare accordingly.

Editor's Note: This story was updated on 2/18/20.

Patricia L. Harman

Patricia L. Harman is the editor-in-chief of Claims magazine, a contributing editor to, and chairs the annual America's Claims Event (ACE), which focuses on providing claims professionals with cutting-edge education and networking opportunities. She covers auto, property & casualty, workers' compensation, fraud, risk and cybersecurity, and is a frequent speaker at insurance industry events. Contact her at [email protected]