Oliver Bäte, the Chief Executive Officer (CEO) of global insurer and reinsurer Allianz, has said in an interview with Bloomberg Television that while the company itself doesn’t have large exposures, for the industry, losses from the COVID-19 coronavirus pandemic are going to be massive.
The unprecedented changes and challenges created by the ongoing pandemic has resulted in an uncertain outlook for insurers and reinsurers. Bäte highlighted the severe economic disruption being caused by the virus, telling Bloomberg that the pandemic hit the industry “like a meteorite impact.”
Across the insurance and reinsurance industry, there’s been debate around the potential size of losses on the underwriting side as global efforts to stop the spread of the virus have forced entire economies to slow dramatically.
While there’s notable uncertainty surrounding the potential business interruption exposure, something that’s been well documented throughout, there’s an expectation for some sizeable losses in other lines.
Furthermore, widespread financial market volatility and stressed equity markets caused by the pandemic will also challenge firms’ investment performance in the weeks and months ahead.
Regarding Allianz, Bäte explained that the firm itself does not have a large exposure. “Now, losses for the industry, in my personal opinion, are going to be massive.
“There’s a lot of debate about are insurers really putting up. I can tell you that across sectors, whether that’s business interruption, travel, media and entertainment coverages, there will be huge losses for the industry coming. It just takes a while for those to materialise. So, 2020 is not going to be a record earnings year for the insurance industry,” said Bäte.
The interview with Bloomberg followed an announcement by the German government that it will provide a backstop for losses of €30 billion for commercial credit insurers in 2020, in return for 65% of their premiums.
Bäte praised the government’s plan, but said that moving forward, the industry needs to look across numerous sectors and exposures and look at ways to better protect society against a systematic impact.
“Please remember, systemic risk is not something that the insurance industry can insure. We rely on diversification over time and in the portfolio. Corona, or any large pandemic, is a systemic event that does not have diversification. So, the industry economic model cannot really work,” Bäte told Bloomberg.