The Covid-19 pandemic will cost global insurance companies an estimated US$55 billion (AU$78.3 billion) according to a report by Swiss Re. However, the firm is quick to point out the industry is well placed to absorb the losses.
“The industry’s capital position means it should be able to handle the Covid-19 shock,” says Jerome Jean Haegeli, Swiss Re’s Group Chief Economist.
“The upper end of the range of total property and casualty claims estimates by most external insurance analysis is US$100 billion.”
Haegeli says Covid-19 is a lesson for insurers and policy makers who, in the interest of long-term societal and economic stability, “…should look to develop more public-private partnership solutions for pandemic risks”.
Swiss Re’s Sigma report says that while the pandemic’s affect on the global industry is akin to the depression of the 1930s – causing a slump in demand generally with life policies experiencing the biggest hit – the sector will bounce back in 2021.
The company expects to see sector divergence, with non-life premium volumes above pre-crisis levels, and life [insurance] below.
…The magnitude of premium losses will be similar to that seen during the global financial crisis in 2008-09…
Haegeli says: “The magnitude of premium losses will be similar to that seen during the global financial crisis in 2008-09.
“We expect a strong V-shaped recovery in insurance premiums, a remarkable showing considering that the world is currently in the throes of the deepest recession ever,” said Haegeli.
This year’s recession, says Swiss Re, will be short-lived, but will lead to a steep fall in demand for insurance globally.
The Sigma report says that after growing by 2.2 percent in 2019, global life premiums are forecast to contract by six percent in 2020. Due to prevailing and lower interest rates, savings products will be more affected, while mortality related covers will be more stable.