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Berenberg estimates global COVID-19 claims at $50-70bn

23rd June 2020 - Author: Matt Sheehan

Analysts at investment bank Berenberg have estimated that global re/insurance claims related to the COVID-19 pandemic will be between $50 billion and $70 billion.

Notably, this range is well below the $107 billion estimate put forward by Lloyd’s of London back in May.

“Fundamentally, insurers are doing well,” Berenberg stated in a new report. “This is because they have huge back books which are earning profits and delivering cash flows day by day.”

“While COVID-19 claims will be large, we believe they are manageable, and there are some offsets, namely lower motor claims during the period of lockdown, rate rises in reinsurance and in commercial lines, and from reduced competition from digital start-ups, which are running out of cash.”

The COVID-19 crisis has also triggered a rise in reinsurance pricing, as well as improved rates for some primary lines, particularly for commercial risks.

In June, for example, the rate rises in Florida hurricane reinsurance amounted to 20-30%, and in Q1 2020 the rate rises in US commercial lines were between 12% (Zurich) and 16% (Allianz).

In terms of economic losses, Berenberg suggested that COVID-19 could cause an impact of $4.5 trillion, or 6.3% of global real GDP.

For re/insurers, the crisis will likely constitute the largest natural catastrophe of the past decade, but analysts noted that it remains comparable with similar medium to large events that the industry has experience previously

Indeed, the larger concern will be lower interest rates and exposure to corporate bonds spreads, which is reflected in a drop in solvency ratios at Q1 2020.

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