“To put this into perspective, GMIs reported a much larger overall decline of nearly US$20 billion in net income,” the report said. “In addition, this does not include all of the financial consequences of the pandemic, which would include unrealised capital gains, reserve adequacy, and new business volume and value. A number of players, notably in the life business, did not single out the pandemic in their financial reporting as a key driver.”
However, no insurer among those rated in the report fell into a position where its capital position was insufficient to meet regulators’ expectations.
“Beyond 2020, we believe additional COVID-19-related losses could be manageable, given that GMIs reported a large share of incurred but not reported losses in 2020 earnings, and also due to the exclusion of pandemic claims that insurers have added to the terms and conditions of policies reviewed in 2021,” the report said.
Non-life takes the biggest hit
Overall, the pandemic hit non-life activities the hardest, according to the report.
“That’s because there is a large negative correlation between people insured against death and the segments of the population who have died from COVID-19 or other conditions that led to excess mortality,” the report said. “These groups notably include old people, who are less likely to have term life insurance, and lower-income people, who are typically less likely to be partly or fully insured.”
In contrast, non-life commercial lines were barely hit, according to the report. The pandemic’s negative effects on underwriting were mostly concentrated on a few products: business interruption, event cancellation, and – to a lesser extent – credit insurance.
“On the other hand, underwriting results increased for some non-life personal lines as the frequency of incidents, notably in motor insurance, dropped as lockdowns took large numbers of cars off the streets,” the report said.
Big losses for reinsurers
“The profitability of large reinsurers slid even more, on average, than for the GMIs,” the report said. “This is because reinsurance policies, especially in commercial lines, covered a large share of primary insurers’ exposure.”
For the top 20 insurers S&P rates across the world, the company estimated COVID-19-related losses at about US$20 billion – which corresponds to nearly four times their year-end 2020 aggregate net profit.
European GMIs face steeper losses
European GMIs were harder hit than those domiciled in other regions, although a large part of their losses came from non-European markets. The higher losses for several European players, including AXA, Allianz and Zurich, came primarily from their large commercial property-casualty lines.
“Overall, aggregate losses posted by the three most exposed players (AXA, Allianz, and Chubb) accounted for more than half of the US$8 billion loss for the 16 GMIs,” the report said.