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Coronavirus poses limited threat to Chinese insurers: Moody’s

4th February 2020 - Author: Matt Sheehan

Analysts at Moody’s Investors Service believe that the ongoing coronavirus outbreak poses only a limited threat to the Chinese insurance sector, with disruption likely to stem mostly from broader economic impacts.

The firm noted that Hubei, the province at the centre of the outbreak, only accounted for around 4% of domestic life and non-life insurance premiums written in 2019.

“The industry’s premium mix also remains dominated by savings-type products, with health insurance accounting for 22.8% of total life premiums at the end of 2019,” said Frank Yuen, a Moody’s Vice President and Senior Analyst.

While insurers could face a jump in low-severity medical claims, Moody’s believes large claims will likely be limited by coverage from China’s public medical insurance funds, which the central government has said will cover expenses for infected individuals and suspected cases.

Additionally, some rated insurers have also taken out reinsurance against pandemic risk, which should cover significant parts of insurers’ in-force books.

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Rating agency AM Best reported last week that reinsurers are likely to face higher levels of risk related to the coronavirus due to their higher exposure to mortality and morbidity risks.

However, Moody’s warned that Chinese insurers could face disruption due to the potential effects of the coronavirus outbreak on the economy.

“The more immediate and significant impact from the coronavirus outbreak on Chinese insurers will stem from the resultant disruption on their broader business, and from the negative impact on investment portfolios due to lingering concerns over a potential further slowdown in the economy,” Yuen explained.

Outside mainland China, travel restrictions from the mainland to Hong Kong and other countries could also limit cross-border insurance demand, which has been a major growth driver for several pan-Asian and Hong Kong-based insurers.

But in the longer term, it’s possible that the current outbreak could raise awareness for health insurance, and raise demand in China.

The coronavirus has infected more than 20,000 people since first being identified by the World Health Organisation (WHO) on December 31st.

The vast majority of cases are in China, particularly in the city of Wuhan where the virus is thought to have originated, with 427 people now believed to have been killed.

Currently, no deaths have been recorded outside of China, but the virus has spread to at least 29 countries, including the US, the UK, France, Australia, Japan, Canada and South Korea, sparking fears of a global crisis.

Notably, the number of coronavirus cases worldwide has now surpassed that of the 2003 SARS epidemic, although the death total remains below the 774 documented over the roughly 6-month SARS outbreak.

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