Insurance market remains ‘resilient’ despite $25bn Covid-19 hit

Research from Hyperion X, the data and analytics division of Hyperion Insurance Group, has found that losses arising from Covid-19 are “best described as an earnings event, not a capital event for the insurance sector”. 

David Flandro, managing director of analytics at Hyperion X, said that Covid-19 losses could be one of the largest loss events the insurance market has ever suffered, but reiterated that they remain “manageable” for insurers.

“Covid insured losses are significant and will likely add up to one of the largest insured loss events in history,” he said. “This being the case, we can now say with increasing confidence what we have said from the beginning: these losses are manageable and are affecting earnings, not solvency.”

And Flandro said that the pandemic has also helped to drive innovation in the market, which could ultimately benefit both clients and insurers over the long-term.

“Perhaps the most significant developments emanating from Covid has been the fundamental changes in how the market assesses, intermediates, and underwrites risk, all of which can benefit clients,” he said.

“Innovation has accelerated during the COVID crisis. It has driven new product design, expedited the creation and leveraging of better data, and accelerated the move to digital trading.

“Carriers are differentiating their offering using technology to improve underwriting results and to lower administrative costs. Hyperion is actively using technology to eliminate legacy intermediation thereby lowering acquisition costs for clients and markets.”

“All of this will ultimately be positive for the end consumer,” he added.

‘No chance’ pandemic will be forgotten

Research from investment bank Berenberg, meanwhile, has estimated that claims stemming from the pandemic to date are “just half the level of consensus estimates” and described Covid-19 as “more like a very large natural catastrophe event than an extraordinarily large one”.

The bank estimated that Covid-19 claims have so far totalled $25.1bn, with Swiss Re estimating total global losses of $50bn to $80bn.

The investment bank did, however, describe the pandemic as “unusual” because of the drawn out nature of the crisis that means there is “no chance” underwriters will have forgotten about it by the time of the January renewals.

This, combined with a prevailing low interest rate environment, means that rates are already rising, with Berenberg predicting rates to remain higher for a significant period of time, in a similar way to how insurance rates and profits remained high for four years in the wake of the 9/11 terrorist attacks.