Analysis by ratings firm DBRS Morningstar reports that the impact of the Coronavirus will be limited for underwriters and the wider life insurance industry.
The firm released its commentary entitled “Coronavirus Disease (COVID-19) Impact on Life Insurers More Likely to Result from Adverse Market Movements than Increased Claims” that identified the major ways DBRS Morningstar expects coronavirus to affect the life insurance industry.
The Coronavirus Disease (COVID-19) outbreak will likely affect life insurers in the following ways,” it said. “Firstly increased incurred claim costs, including death and disability claims, and drug costs, secondly adverse movements in the financial markets, including declines in bond yields, equity markets, and real estate, reducing profitability; and third business interruption and potential impact on revenues.
“As coronavirus continues to spread across the world, its effects are rippling across financial markets and the global economy. The life insurance industry is no exception, particularly given the increasingly global nature of many insurers and their sizable investment portfolios. Although most countries have had minimal reported coronavirus cases so far, and consequently the impact on claim costs for life insurers is negligible to date, the impact on business operations for some global insurers has already surfaced, particularly for those operating in high-risk regions such as China, Iran, and Italy.
“Most life insurers expect to feel the impact of coronavirus on the financial markets because of the highly interlinked global economy.”
The commentary added the impact on insurance claims is expected to be manageable, given the relatively low mortality rate for infected individuals. It is concerned that the adverse reaction of financial markets to the coronavirus outbreak may affect insurers’ profitability, including earnings generated from their investment portfolios; and
“Insurers operating in higher-risk countries are seeing some disruption in their day-to-day operations, which will likely have an impact on revenues,” said the firm.