Of the £1.2bn estimate, £900m relates to business interruption claims, £275m to customers for travel insurance claims and £25m for cancelled weddings, school trips and events.
However most businesses will not be covered for losses related to the pandemic, the ABI has admitted.
Some critics have complained that insurers are failing to pay out claims to businesses for Covid-19 disruption.
But the ABI says the majority of businesses were uninsured for the pandemic. It believes a public-private partnership on pandemic cover in the future could be one way forward.
Despite the lack of widespread Covid-19 business cover, most of the £1.2bn in payouts will be due to business interruption insurance with claims per firm, for those with cover, likely to be large, the ABI said.
The ABi says its £1.2bn figure is only a “working estimate” but it underlines the level of support from the insurance sector for firms and individuals affected by the virus. The figure does not include claims made through Lloyd’s.
The ABI added that no country in the world is able to provide widespread pandemic insurance and whether cover for pandemics can be provided through an insurance model in the future is “an important debate.”
Huw Evans, ABI’s director general, said: “While many business owners are uninsured for pandemics, UK insurers still expect to pay over £1.2bn in claims, making this a significant insured event. From paying all valid claims, to providing a range of extra help and support to customers, insurers are working hard to reassure and support policyholders through this uncertain period.
“However, we are also painfully aware that the majority of businesses are uninsured for global pandemics, as is the case throughout continental Europe and North America. Although ABI members expect to pay £900m in business interruption claims, most policyholders are not covered for pandemic losses. We agree strongly that the UK should examine public-private partnerships to find a lasting solution, to enable more affordable, more extensive pandemic insurance cover to be available to those firms who want it.”
The ABI says insurers have reported “unprecedented” activity in response to Covid-19 with some seeing a 200% rise in call volumes.
Only 4% of insurance products were withdrawn in March and the ABI says its members are being flexible on premium payments and supporting or advising customers on support.