COVID claims fall for European reinsurers in third quarter

Fitch Ratings said Europe’s big four reinsurers have seen a fall in the level of COVID-19 related claims for the third quarter of the year, which may point to a reduction in overall exposure levels.

The firm has analysed the results of Munich Re, Swiss Re, Hannover Re and SCOR SE for the first nine months of the year.

The results revealed that fewer new pandemic-related claims reserves were booked in the third quarter than in the second quarter of the year. Event cancellation covers were the only affected business line that required major adjustments to expected claims, Fitch Ratings explained.

Despite the pandemic-related claims incurred in the first three quarters of the year, Hannover Re, Munich Re and SCOR remained profitable. Meanwhile, Swiss Re substantially reduced its net loss, which had been reported after six months, in quarter three.

“These relatively strong results were possible as a fairly light natural catastrophe loading and an improvement of the underlying underwriting result helped to compensate for losses related to the coronavirus crisis,” added Fitch.

The report said all four major reinsurers have remained well capitalised so far in 2020, which was partially achieved by the issuance of subordinated debt. This allowed for strong premium growth in reinsurance, driven by higher prices, rising demand in Asia, and an increased risk appetite.

Going into 2021, the sector expects risk-adjusted prices in property and casualty reinsurance to rise further, while Fitch added it believed that the pandemic-related claims burden will reduce progressively due to the exclusion of pandemic covers in renewed treaties.

“All major reinsurers have voiced cautious optimism for 2021 as they expected the hardening reinsurance market with risk-adjusted price increases to continue,” added the report. “At the same time, changes in terms and conditions, such as excluding pandemic covers in new or renewed, should progressively reduce the pandemic-related claims burden in property and casualty reinsurance, Fitch believes. Nevertheless, the uncertainty around ultimate losses caused by the pandemic remains high.”