Best’s Commentary: COVID-19 Impacts Add to Deterioration in Underwriting Results of Singapore’s Non-Life Insurers

SINGAPORE--(BUSINESS WIRE)--For the first time in a decade, the domestic non-life insurance segment in Singapore recorded an underwriting loss in 2019, and with the added economic strain from the COVID-19 pandemic, the lackluster underwriting performance is expected to persist, according to a new AM Best commentary.

The new Best’s Commentary titled, “Singapore Non-Life Insurance: COVID-19 Impacts Add to Deterioration in Underwriting Results,” states that insurers’ poor performance in the motor, health and workers’ compensation lines of business continued, along with a significant surge in marine hull and fire insurance claims. This surge was mostly due to severe shipping losses during the first quarter of 2019 and a large increase in fire incidents, which especially involved personal mobility devices. The non-life segment’s combined ratio, which hit 101% in 2019, has increased each year since 2014, when the combined ratio was 85%.

AM Best expects medical claims related to the COVID-19 pandemic to rise, albeit on a limited scale given the government’s commitment to bear the costs of disease diagnosis and treatment. The country’s population, of which 10% is over the age of 65, is considered vulnerable, relative to its peers in Southeast Asia, as the virus poses a greater risk to the elderly. However, a partial mitigating factor may be a decline in claims from elective medical procedures, as individuals hold off non-essential medical visits and clinics and hospitals limit such procedures during the pandemic.

Travel insurance accounted for 5% of total domestic non-life gross premium written in 2019; consequently, a sharp decline in this segment would put a dent in the already low growth of the whole non-life insurance sector. For policies sold in 2019 and 2020, which included the COVID-19 pandemic period within the scope of coverage, AM Best expects that the segment’s loss ratio is likely to increase significantly over the near term, given the recent spate of cancelled flights and travel interruptions. Nonetheless, the claims outcome will still depend on the individual policy wording.

AM Best is of the opinion that the expected economic fallout in relation to COVID-19 is likely to add pressure on the market’s premium growth in 2020 and potentially over the subsequent years. Although the COVID-19 pandemic’s impact on insurers’ underwriting results may be manageable, the negative impacts to investment results are likely to be material. However, AM Best does not anticipate significant pressures arising from the COVID-19 pandemic on the ratings of the non-life insurers it rates. These companies have solid balance sheet strengths. Nonetheless, pressure on the underwriting performance of some smaller insurers remains due to persistently challenging market conditions in several key lines of businesses.

To access the full copy of this commentary please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=296598.

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.

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