Best’s Commentary: Global Reinsurers Resilient in Face of COVID-19-Related Adversity

OLDWICK, N.J.--()--While AM Best views the global reinsurance segment as well-positioned to withstand setbacks due to the COVID-19 outbreak, it should be noted that the adverse underwriting- and investment-related impacts may restrain capacity and further support pricing momentum.

A new Best’s Commentary, “Global Reinsurers Resilient in Face of Adversity,” notes that although the global pandemic has caused short-term disruption in business, reinsurers, brokers and most cedants appear to have the necessary technology infrastructure to maintain business operations. From an operational perspective, the upcoming April and June renewals should proceed as usual. While the industry was already under considerable pressure to increase rates following three consecutive years of losses, pricing during these upcoming renewals, particularly in June, also could be influenced by capacity tightening from third-party capital, as investors are pressured by collateral and margin requirements owing to the volatile markets.

The commentary also highlights potential impacts on each segment of the industry, including:

  • Non-life reinsurance: The duration of the pandemic will dictate the degree of losses. Carriers with the greatest potential for insured losses are in the specialty classes of business such as event cancellation, travel, credit/surety/mortgage, agriculture, directors & officers, and business interruption. AM Best expects a negative near-term impact on premium revenue and a significant level of unrealized losses to dampen earnings and reported shareholder equity. Regardless, most companies will be well-positioned to take advantage of the potential rebound in business activity once the social and economic impacts of the pandemic subside.
  • Life reinsurance: The main life reinsurers in this highly concentrated industry traditionally avoid the investment risks associated with several products on the primary life insurance side, and therefore are less exposed to financial market risk. A factor that may alleviate the financial impact is a disproportionate number of fatalities among the elderly, given that mortality insurance products tend to be focused on working-age groups. However, the actual geographic coverage of each reinsurer’s portfolio may make an important difference, given the variations in age distribution by territory and other factors, leading to widely varying mortality rates by country.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=295965.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Scott Mangan
Associate Director
+1 908 439 2200, ext. 5593
scott.mangan@ambest.com

Michael Porcelli, FSA
Director
+1 908 439 2200, ext. 5548
michael.porcelli@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

Scott Mangan
Associate Director
+1 908 439 2200, ext. 5593
scott.mangan@ambest.com

Michael Porcelli, FSA
Director
+1 908 439 2200, ext. 5548
michael.porcelli@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com