Individuals and businesses will be keen to safeguard against the impact of another health crisis and it is likely that we will see further insurance demand and increased revenue from premiums, according to an analyst note on Swiss Re.
The note, by Discount Fountain, also notes that growth across the Asian market coupled with increasing demand for insurance products post-COVID bode well for the industry.
Looking at the reinsurer, it says that return on equity remains low and Swiss Re will need to demonstrate evidence of further growth to justify longer-term upside:
“The COVID-19 pandemic has been marked by excess mortality and widespread business closures. As a result, the pandemic has also put a large strain on insurance companies – who have had to make a higher degree of pay-outs than in normal times.”
“With reinsurance being Swiss Re’s largest business segment in terms of net premiums earned, this segment was particularly hit by the effects of COVID-19.”
It says that as the world’s largest health and life reinsurer – excess mortality across the US, England and Wales led to significantly higher insurance pay-outs than in normal times. In addition, business closures during this period also meant a higher proportion of pay-outs.
“When analysing Q1 2021 performance, we see that the company made a recovery in net income to $333 million for this quarter. However, the company also estimates that in the absence of COVID-19 – net income would have come in at $843 million (excluding estimated tax impacts or impact of reserves for claims relating to COVID-19).”
“When analysing by segment, we see that Life & Health Reinsurance still came in at a loss of $184 million.”
“However, it is notable that the estimated net income excluding COVID-19 would still have come in at substantially less than that of Property & Casualty Reinsurance – which may reflect the fact that insurance claims across the L&H segment may be higher in any case during the winter months, due to a trend of excess mortality during this period.”
Looking more generally, the note says that the COVID-19 pandemic has put a strain on insurance companies – Swiss Re not being an exception. However, the current crisis has highlighted the need for adequate insurance during times like these.
“This can only be a positive for the insurance industry going forward – and a possible by-product of COVID-19 could be an increased demand for insurance products in the future,” it says.
It adds that Swiss Re – like other insurers – has taken a financial hit due to COVID-19. However, growth across developing markets, coupled with signs of increased demand for insurance products post-COVID-19 looks encouraging for the industry.