Insurance and reinsurance industry losses from the COVID-19 pandemic up to the end of the third quarter of 2021 near $45 billion, making it the third most expensive catastrophe event for the industry, according to broker Howden’s reinsurance renewals report.
Behind only 9/11 and Hurricane Katrina (the most expensive insured loss ever at approximately $82bn), the coronavirus pandemic has so far cost re/insurers somewhere around the $44 billion mark, reports Howden.
While this is substantial, it is much lower than the early warnings of a $100 billion loss for the market. A loss of this size, says Howden, now looks “manifestly improbable” regardless of any remaining uncertainty, which is supported by the levelling off of COVID-19 claims.
In 2020, the report notes more than $35 billion of re/insured COVID-19 losses, of which around 90% came from the property and casualty (P&C) market – notably in event cancellation and business interruption.
Soon after the arrival of the pandemic and subsequent legal battles surrounding the validity of certain business interruption claims, re/insurers moved to exclude COVID-19 from many policies.
As a result, the volume of P&C claims fell dramatically in 2021 to $1.2 billion up to the end of Q3. During the same period, however, Howden notes additional life claims of $5.5 billion, with more likely to come in 2022.
As many regions continued to grapple with the virus in Q4 and with hospitalisation rates still high in some areas today, life claims will undoubtedly filter through in 2022. But for the P&C side of the business, Howden expects a lesser impact.
“There’s only so much event cancellation coverage out there,” said David Flandro, Head of Analytics at Howden unit HX to Reuters. “There’s only so much civil action coverage out there, and when you get to $40 billion, that’s pretty much exhausting what was underwritten.”
The pandemic was unsurprisingly a challenge for the re/insurance sector, but in spite of its consequences, Howden feels that losses “have been eminently manageable.”
“Even if Omicron results in further shutdowns, direct P&C underwriting impacts for previously affected areas such as property and contingency insurance will be reduced significantly by widespread communicable disease exclusions now in place.
“Perhaps the more enduring legacy of the pandemic for risk managers and underwriters will be altered risk perceptions, particularly for systemic event,” says the report.