(Reuters) – Insurance companies in the UK risk being optimistic about estimating losses from COVID-19-related claims and should stress test their underlying assumptions, the Bank of England said on Friday. to pay out claims from companies that have been disrupted by lockdowns to fight the pandemic that tipped the economy into a steep recession.
In a letter to insurers on Friday, the Bank of England outlined its conclusions from a review in the general insurance sector on reserves, managing exposures and managing uncertainty over contracts in the light of COVID-19. companies have not been able to identify and track COVID-exposed policies accurately, leading to unexpected COVID losses, "the regulator said in a letter to insurers.
" Companies should ensure that this uncertainty is reflected in reserve estimates and that, if possible, , appropriate procedures are put in place to identify and track exposed insurance policies. "
A number of insurers' estimates of COVID-1
" You can expect us to seek evidence of the risk function's involvement in challenging reservation teams and ensure that the Board is adequately informed of the uncertainty the above risks give rise to. before it sets reserves, "said the BoE.
COVID-19 has shown how disputes can arise over policy formulations and insurers should consider identifying and monitoring such risks, the BoE said.
" In the coming months You can expect us to discuss with you how you have considered each of the points raised in this letter, "said the BoE.
The outcome of the case is expected to affect 60 insurers, 370,000 policyholders and billions in damages.