The impact of the ongoing COVID-19 pandemic is expected to result in a non-life re/insurance market loss of between €1.25 billion to €1.75 billion (USD 1.47bn – USD 2.1bn) in Germany, driven mostly by nationwide business closures, according to executives at E+S Rückversicherung AG, the Hannover Re subsidiary responsible for the reinsurer’s German operation.
In a virtual Baden Baden 2020 press briefing, Dr. Michael Pickel, Chief Executive Officer (CEO) of E+S Rück and Jonas Krotzek, the company’s Managing Director, discussed the impacts of COVID-19 on the German insurance and reinsurance market.
Alongside commercial property, the company noted the effects on industrial property, liability, legal protection, and motor insurance, including reduced levels of premium income and elevated claims expenditure.
Of the total, the large majority, an estimated €750 million to €1.25 billion (USD 884mn – USD 1.47bn) of the market loss in Germany, is expected to come from the commercial property space, as nationwide business closures led to elevated levels of claims.
“The situation we were facing here, and we are still facing, is that we had many different phrasings and wordings in the market for this kind of insurance, and which is only a small segment to complement the property insurance and business interruption insurance,” said Krotzek.
“But, we have quite a lot of losses here and as mentioned, we had many different terms and conditions and phrasings. And, so, we had a situation when we had the lockdown here in Germany, that it is not always clear whether it was intended to be covered…So, we have clients when we think it’s quite easy to say that it is covered or it’s not covered, but there were also many clients with wordings where it was difficult really to say yes it’s covered or not.”
In these instances, he continued, E+S Rück elected to support settlement based upon the ‘Bavarian model’, a government-backed initiative which proposes to pay these clients 15%, and in some cases more, of the loss.
“For these cases where it was not really clear we said it’s better to have a solution also from a client perspective,” explained Krotzek.
Echoing the thoughts of other industry leaders, Krotzek later stated that pandemic cannot be comprehensively covered by the insurance industry.
“We are prepared to cover a pandemic for our clients as well, but only limited and in cases where it’s clear what kind of pandemic impacts are covered by our clients’ insurance companies. And, as we cannot cover it comprehensively, we can only give smaller limits to clients here. But we are still open to help our clients,” said Krotzek.
