Reinsurers post weak half-year earnings amidst surging COVID-19 claims

By Ranamita Chakraborty

A new report from Moody’s Investors Service noted that while investment returns rebounded, global reinsurers reported anaemic earnings during the first half of 2020 as COVID-19 claims increased.

Nevertheless, one positive aspect of 1H2020 results was strong pricing momentum and capital levels remaining healthy even though a high degree of uncertainty persists.

Global reinsurers reported a broad-based improvement in pricing, extending beyond previously loss-making lines of business. Price increases in recent policy renewals are in the mid-to-high single digits on average and significantly higher natural catastrophe-exposed business in the US and Asia Pacific,” said Moody’s vice president Christian Badorff.

However, pricing increases are said to be beneficial as the significant drop in interest rates has affected investment yields substantially during 1H2020.

The lower yields will pressure margins, particularly on longer-tail casualty lines. Moreover, reinsurers will need to contend with an active hurricane season among other natural disaster and man-made losses.

During the second quarter of this year, pandemic claims rose significantly for some reinsurers compared to the first quarter of the year.

In the non-life sector, there was a significant variation between companies owing to differences in how the assessment of claims exposures has evolved since the end of the first quarter.

Large, multi-line reinsurance groups were typically hit the hardest while travel insurance and event cancellation claims rose substantially over the six months.

Concurrently, business interruption claims and litigation started to arrive in the second quarter.

Reinsurers with life operations also reported emerging claims in the second quarter and Moody’s expects these to rise further over the remainder of the year.

Asia Insurance Review

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