COVID-19 Provides Insurers an Opportunity to Demonstrate Value, But Political and Regulatory Risks Loom Large
April 13, 2020
Contracting Economy Likely Hurts All Companies; A Spur for New Products?
HARTFORD, CT, April 13, 2020—Leading global investment management firm Conning reports that the insurance industry appears well-suited to demonstrate its value during the Covid-19 pandemic, but the decline in asset values as well as direct and secondary loss exposure will pressure balance sheets for certain insurers.
Conning’s comprehensive examination of the pandemic’s impact, “COVID-19 effect on the insurance industry,” is a report packaged in four separate chapters: an industry overview, along with individual reports on the property and casualty, life/annuity, and health industries.
“Conning expects that growth will be negatively affected across all sectors as the economy rapidly contracts, with a high degree of uncertainty around the magnitude, duration, and recovery,” said Steven Webersen, Head of Conning’s Insurance Research group.
Life-annuity insurers are most exposed to asset changes affecting capital and risk-based capital charges, Webersen said. Reduced economic activity will result in lower property-casualty claims exposures, but consumer advocates are calling for coverage of business interruption and premium reduction adjustments, he added. Meanwhile, health insurers will likely experience a rise in claim costs, disproportionately affecting those with Medicare concentrations. And exogenous factors—particularly government actions – may have broad effects on the industry, Webersen said.
“Our findings suggest that the industry as a whole should be able to manage through this event, as it has through other major events such as the 1871 Chicago fire, the 1906 San Francisco earthquake and 9/11,” Webersen said. Periods such as this also tend to spur innovation, he added, suggesting as an example that insurers may develop new products and demonstrate their ability to add value at this time of crisis.
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