Reinsurers are adapting to COVID-19 but it remains unclear how hard they will be hit by the pandemic.
Since the pandemic began, reinsurers have applied virus exclusions across most property reinsurance contracts and have also inserted them into many casualty treaties.
But they continue to tally the size of coronavirus-related losses from prior reinsurance contracts.
Virus exclusions have “been largely a mandatory requirement for property renewals driven by board and investor response to the pandemic,” said Lara Mowery, global head of distribution at Guy Carpenter & Co. LLC.
For property renewals that involve commercial exposure, the market has coalesced around three London Market Association wordings that exclude virus exposures and that will likely continue with the Jan. 1 renewals, said Keith Wolfe, president U.S. P&C at Swiss Reinsurance Ltd. in New York.
Casualty wordings are usually individual deal discussions around the underlying portfolios, depending on lines of business, he said.
The COVID-19-related losses under prior contracts, he said, fall into three main areas: event cancellation, credit and some other surety exposures, and business interruption, he said.
The extent of the losses, though, remains unclear as claims continue to be processed and litigated, Mr. Wolfe said.
In the U.S. market “there is largely very good contract clarity” for both explicit virus coverage and exclusions, he said, but in Continental Europe and the United Kingdom there is less clarity.
Fitch Ratings Inc. expects the reinsurers it tracks to report $9.3 billion in COVID-19 losses in 2020 and a further $1 billion in 2021, said Brian Schneider, senior director at the rating agency in Chicago.
The reinsurers will likely post a combined ratio of 105.8% in 2020, compared with 101% in 2019, he said.
COVID-19-related losses have not directly led to significant casualty price rises during the hardening market, said Ian Thompson, chief underwriting officer, casualty and specialty at Ascot Bermuda, a unit of Ascot Group Ltd.
“I don’t think people are using it to push price; they are pushing price because the results in casualty have been so awful over the past few years,” he said.
Meanwhile, while the pandemic restricted travel for reinsurers and reinsurance brokers, the market has adapted well to remote working, and reinsurance placements largely have been managed successfully, market participants say.
And some of the changes may be lasting, they say.
“I can see a significant, permanent shift in how we work going forward. I cannot imagine the industry as a whole traveling nearly as much as we did in the past now that we’ve seen how effective some of these technology tools to collaborate and connect online are,” Mr. Wolfe said.
