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How much Northbridge could pay out in COVID claims


November 2, 2020   by Greg Meckbach


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Long-term care facilities accounted for a good chunk of the US$25.5 million in COVID-19 losses that Northbridge reported in the three months ending Sept. 30, officials with parent company Fairfax Financial Holdings Ltd. suggested this past Friday.

Toronto-based Fairfax released its 2020 Q3 financial results Oct. 29. Fairfax owns several insurers, including OdysseyRe, Allied World, Brit PLC, Crum & Forster and Toronto-based Northbridge.

Across all of its insurers worldwide, Fairfax recorded COVID-19-related losses of US$536 million during the first nine months of 2020, said Prem Watsa, Fairfax’s founder, chairman and CEO, on Oct. 30 during a conference call.

When reporting COVID-19 losses to investors, many insurers are reporting not only actual claims but also predictions of what impact COVID-19 will have on their books of business – even losses that have yet to be reported.

For Fairfax’s insurance companies, about 60% of the US$536 million in COVID-19 charges so far in 2020 is for losses incurred but not reported, Watsa said this past Friday. Paid losses make up about 20% while case reserves make up the remaining 20%.

COVID-19 was declared a pandemic Mar. 11, 2020, resulting in unprecedented closures aimed at keeping people apart.

For Fairfax’s insurers, about 40% of the US$536 million in COVID losses come from business interruption exposures primarily outside the United States, Watsa said Oct 30. Another 30% is from event cancellation coverage, while the remainder is from lines such as casualty, surety and travel. Of Fairfax’s US$536 million in COVID losses for the first nine months of 2020, US$143 was recorded during the third quarter.

Fairfax reported Oct. 29 that Northbridge recorded COVID-19 losses of US$60.5 million for the first months of 2020, of which US$25.5 million was reported in the third quarter.

“There probably will not be significant additional [COVID-19] exposure coming through but it was related primarily to a long-term care facility recorded in that third quarter,” Fairfax CFO Jennifer Allen said during the call, in reply to a question from an investment banking analyst about the Q3 COVID loss recorded at Northbridge.

“There is still considerable uncertainty as to the ultimate costs of the virus,” Watsa said. “The pandemic is ongoing. As long as it persists and disrupts the economy, new losses may emerge.”

Fairfax executives did not name any long-term care facilities or nursing homes that accounted for COVID-19 losses booked at Northbridge. But it is not the only Canadian insurer affected by liability arising from elder care.

Several nursing homes and long-term care facilities have been named in lawsuits arising from COVID-19.

“There is a general understanding that many of these places are not run very well,” Stephen Stewart, president and CEO of Toronto-based Stewart Specialty Risk Underwriting Ltd., told Canadian Underwriter in a separate email earlier.

If a resident or family member sues a long-term care or nursing home in Ontario, there could be cause of action under the Occupiers Liability Act, Stewart said.

Long-term care and nursing home operators have a duty to keep premises safe from hazards or unsafe conditions but there is the question of how it would how that would fit into COVID-19, Erika Carrasco, Calgary-based partner with Field Law, said in an earlier interview.

In some instances, a question before a court could be whether it was foreseeable that residents would suffer harm unless certain measures were taken, Carrasco said at the time.

Neither Stewart nor Carrasco were commenting on any insurer or any lawsuit in particular. They were interviewed in the summer of 2020 in the context of class-action lawsuits against nursing homes and long-term care homes in which residents became sick and died from the coronavirus.

Fairfax reported Oct. 29 that Northbridge reported a combined ratio of 89.9% in 2020 Q3, an 8.6-point improvement from 97.5% in 2019 Q3. Northbridge’s net premiums earned were US$377.8 million in 2020 Q3, up from US$332.4 million during the same period in 2019.

Company-wide, Fairfax reported a one-point increase in its combined ratio from 97.5% in 2019 Q3 to 98.5% in the latest quarter. Net earnings dropped from US$74.4 million in 2019 Q3 to US$41.8 million in the latest quarter. Fairfax’s total net premiums written increased 12.6% from US$3.32 billion in 2019 Q2 to US$3.74 billion in 2020 Q2. About two-thirds of Fairfax’s business comes from Odyssey Group, Allied World and Crum & Forster, which are based in Connecticut, Switzerland and New Jersey respectively.

Feature image via iStock.com/wanderluster