COVID-19 claims cost life reinsurers $4.4bn in Q1, says BI
Titled ‘Life Reinsurers Recovery Hopes’, the findings are a continuation of the significant COVID-related losses already reported, notably Lloyd’s assessment that its own payouts could ultimately reach £6.2bn.
A spike in mortality rates in Q1 is the root cause of loss, with the US hit the hardest and the UK and Canada trailing behind.
However, large reinsurers in the US and Europe (such as Swiss Re, RGA, Munich Re, and Hannover Re) have begun to experience a profit rebound following vaccine rollouts in both regions. As such, there is cause for optimism that Q2’s results will be more positive.
COVID-19: A continual reinsurance challenge
BI calculated that Swiss Re and RGA accounted for 35% and 27% of claims respectively, making the vaccination programmes in their respective countries a vital lifeline for recovery. However, commented Senior Analyst Charles Graham, the spread of new coronavirus variants poses a constant challenge:
“COVID-19 mortality claims rose sharply in the first quarter after deaths spiked in the US, UK, and other countries. New variants of the virus remain a threat yet the success of vaccines gives reinsurers hope mortality claims won’t return to first-quarter levels.”
Elsewhere, other regions are having mixed success with their own vaccination rollout, thereby perpetuating the virus’ initial risk factors. For instance, Latin America’s top three insurance markets - Brazil, Mexico, and Chile - have vastly different levels of vaccine penetration: 10.5%, 9.7%, and 41.9% of their population respectively.
Accelerating reinsurance’s digital transformation
It remains to be seen whether Q2 will yield brighter financial fortunes for the reinsurance industry, but one thing is certain: the pandemic has changed the sector irreversibly.
“I actually think [the pandemic] has not been a bad thing at all for our industry from an operational perspective,” Dr. Andrew Johnston, Global Head of InsurTech at Willis Re, told us. “I don't think that any single initiative or business could have accelerated the digitisation process to the degree that COVID has been able to.
“I think that it has democratised elements of market competitive advantage; if an insurer cannot manage risks digitally, they're probably in trouble.
Floods in Victoria declared insurance catastrophe by ICA
Heavy storms that began on the week commencing 7 June have wrought power outages and significant property damage across the Australian state of Victoria.
The worst-affected areas are reportedly Gippsland, Traralgon, and the Yarra Ranges.
With as many as 130,000 homes cut off by some estimates, the Insurance Council of Australia (ICA) has officially declared a state of ‘catastrophe’ to bring much-needed aid and claim prioritisation to those affected. It will also have the following effects:
- Claims will be triaged according to the severity of each policyholder’s need
- The ICA hotline (1800 734 621) has been activated to provide assistance with policy details or the claims process
- ICA representatives will be mobilised to assist local agencies and services
- A taskforce has been charged with identifying and addressing any underlying issues revealed by the catastrophe
Catastrophe insurance: A warning for the future?
Swiss Re had found that global insurance losses rose 40% to US$76bn in 2020, a concerning figure that the company considered further evidence that climate change is the industry’s largest existential threat.
Elsewhere, Artemis estimated that the catastrophe (cat) bond market had reached $11bn in the same year. With reference to 2021’s prospects, Steve Evans, Owner and Editor of Artemis, predicted yet another record year:
“All the signs point to another busy year for cat bonds and insurance-linked securities as risk transfer structures, as sponsors increasingly look to the global capital markets as an efficient source of insurance protection."
Meanwhile, the precise extent of the damage caused by the Victoria flood remains presently unknown. Andrew Hall, CEO of the ICA, reported that 6,500 claims had been filed in the first few days.
“As many areas are currently inaccessible due to floodwater, insurers are expecting further claims in coming days as emergency services allow residents to return to their properties to examine the extent of their damage and losses,” he said.