Asian reinsurers’ losses related to the coronavirus pandemic appear to be on a manageable scale thus far due to tight measures to curb the spread of the virus, according to Fitch Ratings.
The rating agency noted that most Asian reinsurers entered the crisis well-capitalised, but warned that business growth could slow as the economy and direct insurers’ premium growth decelerate.
Fitch believes the maintenance of sound capitalisation will be crucial to cushion against unexpected capital consumption due to a potential spike in claims as the pandemic continues to evolve.
The firm revised its sector outlook for Asia-Pacific life and non-life re/insurers to negative from stable following the coronavirus outbreak.
Analysts cautioned that the pandemic may also affect claims development, although the possibility of a sharp spike in claims should be limited by the generally swift enactment of virus containment measures in the region.
Overall, Fitch sees pandemic-related claims for re/insurers as being contained to key Asian markets.
For instance, in China and South Korea, basic medical expenses for infected individuals are covered by public medical insurance funds, so the spill over to re/insurers is low.
Similarly, claims related to the pandemic have also been low in Sri Lanka and Indonesia, where treatments are usually offered on a no-fee basis by public-sector hospitals.
In terms of business interruption claims, Fitch has not seen widespread claims of this kind in Asia, and does not expect non-life reinsurers to be severely hit by such losses at the moment.
Business interruption products in China generally contain an exclusion clause for epidemics, and Japanese life insurers’ exposures to business interruption claims in their domestic business are also limited.
These losses are considered small compared with the weather-related catastrophe losses incurred by the three major non-life groups in Japan, which totalled over JPY1 trillion last financial year.
Likewise, Fitch sees business interruption claims in Australia and Thailand as limited given the exclusion of pandemic risks.
