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Most Insurers Won't Touch Coronavirus Coverage. In China, It's Easy to Get.

The Wall Street Journal. logo The Wall Street Journal. 4/10/2020 Jing Yang
a person cooking in a kitchen preparing food © Qilai Shen/Bloomberg News

Insurance companies in China are taking on an unusual mission: They are promising to cover business losses from the coronavirus pandemic, as hundreds of millions of people return to work, and the country tries to rev up its economic engine.

Since February, dozens of Chinese property-and-casualty insurers have rolled out new policies or expanded existing ones to provide compensation when workers contract Covid-19, the respiratory disease caused by the new coronavirus.

The insurance payouts would help companies that are forced to close temporarily if staffers fall sick, other employees have to be quarantined and business activities are disrupted.

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Some of the policies are provided free-of-charge by insurers, while others have low premiums that are subsidized by local governments. Many sellers of coronavirus-related coverage are state-owned insurers, which can likely fall back on state support in the event of major losses.

The moves by Chinese insurers stand in contrast with the stance of many global property-and-casualty insurance companies, which have excluded infectious-disease epidemics from most standard business-interruption policies and avoided having to make large payouts. That has left many American businesses on the hook for coronavirus-related losses, prompting recent calls from U.S. lawmakers and regulators for insurers to help shoulder the growing financial burden on companies.

The coronavirus outbreak began in China in late 2019 and spread rapidly and widely across the country in January and February, forcing shutdowns of factories, offices, retail shops and scores of other venues. Economists from UBS and Bank of America recently slashed their forecasts for the country’s GDP growth rate to 1.5% for 2020, which would be a record low since China opened its markets to the wider world some 40 years ago.

New coronavirus infections in China slowed sharply in March, leading local governments to ease restrictions on travel and allow many factories and stores to reopen. Beijing has embarked on an all-out effort to restore industrial production across the country and many companies have brought workers back to their jobs, but the risk of more infections is still present. China’s health commission reported nine new locally transmitted infections in the southern province of Guangdong, which houses a major manufacturing hub, from Saturday through Wednesday.

The country’s insurers are stepping up with so-called return-to-work insurance to tie in with government efforts to reboot the engine of the world’s second-largest economy.

“If adopted widely, such policies will give companies peace of mind as they resume businesses,” said Andrew Polk, partner at Trivium China, a Beijing-based strategic consulting firm.

Since the virus first emerged, 68 Chinese insurers have introduced coronavirus-related products, according to the country’s banking and insurance regulator. Some of them are designed to compensate individual employees for work stoppages, in addition to compensating their companies.

Dozens of local governments have pledged to foot between 50% and 70% of the policy premiums. Some have asked companies to band together to sign up for group policies at better rates.

In the eastern coastal city of Ningbo, the government mandates that payouts can be triggered in such tangential scenarios as a forced quarantine in a policyholder’s surrounding areas, even if no infection occurs on its premises.

Chinese insurers are offering these policies in part because they want to be good corporate citizens, said Michael Powers, a risk mathematics professor at Tsinghua University’s School of Economics and Management. “There’s more cohesion and a sense of unity and shared sacrifice in response to the pandemic,” he said.

Chinese state-owned insurers, such as the country’s largest reinsurer China Re Group, have also thrown their weight behind the initiative, according to Leonard Li, a Hong Kong-based partner at consulting firm Oliver Wyman.

China Re said it has been “deeply involved in” the product development, data analysis and pricing of pandemic-related policies. When designing new policies, insurers typically need buy-ins from reinsurers, which underwrite insurers’ risks and serve as the industry’s last line of defense.

Many policies are tailored for small businesses that have been among the hardest hit as revenues have stalled, and are provided at no cost to them.

A free-of-charge policy from Ping An Insurance (Group) Co.’s property unit targets companies that have up to 150 employees. It promises payouts of up to 100,000 yuan (about $14,000) to each employee that contracts Covid-19, subject to a 1 million yuan cap for staffers at any one firm. Up to 500,000 companies can sign up for the plan.

Mobile payments giant Alipay is offering a business-interruption policy, also at no cost, with a maximum daily payout of 800 yuan for 14 consecutive days for companies that employ no more than 20 people. The policy has a duration of 60 days.

Since mid-February, more than 50,000 small businesses have signed up for the policies via Alipay’s app, and only several claims have been filed, according to a spokeswoman for Ant Financial Services Group, which owns Alipay.

Providing such coverage free is also a way for companies to grow market share, said Tsinghua University’s Mr. Powers. “If you are giving out one type of insurance, customers are more likely to buy another type of insurance from you,” he said.

Nationwide, Chinese property-and-casualty insurers have made just 102 million yuan ($14.48 million) in payouts related to the new coronavirus as of March 27, according to the Insurance Association of China, a semiofficial industry group.

The hasty rollout of coronavirus-coverage plans comes with risks for insurers. Globally, coverage for infectious diseases and epidemics has been broadly shunned for years due to its unpredictable nature and the potential for losses to snowball across many companies.

The coronavirus epidemic will place additional strains on China’s property and casualty sector at a time of already thin profits for insurers, due to a weaker economic outlook and increasing claims, according to a report by S&P Global Ratings in February.

The Chinese government’s apparent success in containing the virus has likely provided some comfort to domestic insurers. “The situation is more under control in China, which means the costs for insurers will be less variable, compared to the U.S.,” Mr. Powers said.

Write to Jing Yang at


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