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Coronavirus impacts to be limited for EMEA & US markets: S&P

25th February 2020 - Author: Matt Sheehan

The ongoing coronavirus outbreak is not expected to cause any earnings or capital shocks for insurance and global reinsurers based in Europe, the Middle East and Africa (EMEA) and the US, according to S&P Global Ratings.

The rating agency expects these re/insurers to incur some claims from the spread of COVID-19, but believes that the impacts will fall well within the range covered by their capital buffers.

Analysts noted that the largest hypothetical exposure for these companies would arise from pandemic risks via their mortality business in global life reinsurance portfolios.

However, property and casualty re/insurers could also be vulnerable to COVID-19 related claims through other lines, such as aviation, travel insurance, credit insurance, and contingency or event cancellation cover.

Most business interruption and aviation policies only cover losses from physical events, but S&P anticipates that insurers could see claims for contingent business interruption due to China’s importance for the global economy.

In terms of life insurance, the developing markets in Asia have also been an important driver of growth for many insurers in recent years, meaning the region is particularly important for the sector.

That said, the majority of mortality business is still written in the US and Europe and the coronavirus outbreak is still heavily concentrated in China.

Additionally, EMEA-based multiline re/insurers that are exposed to the Asia Pacific region typically benefit from diversification across many lines of business and geographies, S&P said, as well as robust capital adequacy, and disciplined underwriting.

Since being identified by the WHO in late December, there have been more than 80,000 confirmed cases of coronavirus, and 2,707 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.

Rating agency AM Best has 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.

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