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Law360, London (March 19, 2020, 2:44 PM GMT ) British insurer Direct Line said Thursday it has seen the cost of coronavirus-related travel insurance claims rise from £1 million ($1.1 million) to £5 million in less than two weeks, as the U.K. government advises against nonessential international travel.
Direct Line said in a stock market update that the number of claims had risen significantly between March 3 and March 15, and that it expects more in the coming weeks.
The insurer stopped selling travel insurance to new customers on March 13, joining other U.K. household names Admiral, Aviva and LV, which suspended sales the day before. Direct Line said it expected to be hit with more claims.
"An increase in claims following further travel restrictions ... is expected, although it is too early to estimate the potential impact," the insurer said. "The group has implemented measures to help mitigate this, including pausing new travel insurance sales."
The insurer also said it had reinsurance cover totaling £18.5 million 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 U.K. 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 U.K. government increasingly advises against nonessential travel."
The insurer said Thursday it would also pause a £150 million share buyback plan, which it said would have bolstered the company's solvency capital ratio. So far £29 million 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 Wednesday, 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.
--Editing by Alyssa Miller.
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