Insurer rating agencies should watch efforts to contain the new coronavirus in China closely, but, at this point, the virus does not look as if it will hurt U.S. health insurers’ earnings or financial strength, according to Fitch Ratings.
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The rating agency put out a commentary to show investors and others what its rating analysts think about the possible effects of the new coronavirus on the U.S. health insurers it rates.
Most of those health insurers include room for the effects of a bad influenza season in their premiums, Fitch says in the commentary.
At U.S. health insurers, “premium rates do not incorporate an expectation for a pandemic,” Fitch says.
“However, Fitch does not currently expect the new coronavirus, referred to as ’2019-nCoV,’ to have a material adverse effect on the operating performance or overall credit profile of U.S. health insurers,” Fitch says.
At this point, the number confirmed cases in the United States is small, there is no evidence of the virus spreading from person to person in the United States, and U.S. authorities have adopted containment measures, Fitch says.
Those facts suggest that the effects of 2019-nCoV may be as modest as the effects of the severe acute respiratory syndrome (SARS) coronavirus and the Middle East respiratory syndrome (MERS) coronavirus, Fitch says.
One challenge, however, is that the first five confirmed cases of 2019-nCoV in the United States are in four separate states, Fitch says.
Fitch says it usually assumes that geographic diversification will help protect an insurer against the effects of regional infectious disease outbreaks.
“The appearance and transmission of the virus from several different regions could reduce the benefits of geographic diversification of membership,” Fitch says.
— Read The New Coronavirus, for Agents, on ThinkAdvisor.