Coronavirus adds economic pressure for Southeast Asia re/insurers: AM Best

The claims impact from the coronavirus is likely to be manageable for Southeast Asia-based re/insurers in the short-term, but the resulting economic slowdown could lead to additional pressures, according to analysts at AM Best.

The rating agency expects the potential direct impacts of the coronavirus to include medical, personal accident, mortality, travel and business interruption claims.

But the low number of COVID-19 cases in Southeast Asia, as well as epidemic policy exclusions, and government support for diagnosis and treatment costs are expected to limit the overall loss the industry could face.

Instead, the impact will be dependent on the spread of the virus in this region of the coming months, and the knock-on effects to business activity.

AM Best believes the economic fallout will be unfavourable for insurers’ investment activities, revenue generation, and day-to-day operations over the near-term.

That said, a number of larger non-life insurers have now enhanced their coverage for those diagnosed with the coronavirus even for policies with exclusions for widespread diseases and virus outbreaks.

Benefits offered by some include hospital cash, lump-sum payments, waiver of periods for new policies, faster claims payments, and a general relaxation of the rules surrounding claims submissions.

Life insurers have also announced new coronavirus-related benefits, such as cash payment on diagnosis, hospital cash and a premium payment extension period for those diagnosed–for both new and existing life insurance customers.

AM Best considers the reinsurance industry as having some exposure to the spread of COVID-19, although it noted that many life insurers in Asia do not have reinsurance protection for extreme mortality, such as epidemics.

The rating agency had previously said that reinsurers are likely to face the highest risk from the coronavirus due to their typically higher exposures to mortality and morbidity risks.

Swiss Re and Hannover Re are now among the global reinsurers to say they are not anticipating any major exposure to the coronavirus outbreak.

Since being identified by the WHO in late December, there have been almost 80,000 confirmed cases of coronavirus, and 2,626 people are believed to have died from the outbreak.

The vast majority of cases and deaths have been in China and in particular centred around the city of Wuhan, where the virus is thought to have originated.

But infections have increasingly been recorded in other countries, sparking fears of a global pandemic.