Re/insurers facing high COVID-19 based payouts will be hit harder by catastrophe claims towards the end of the year, according to data and analytics specialist GlobalData.
Analysts predict that companies with large pandemic losses will face a heavier financial burden from catastrophes as the COVID-19 crisis ramps up pressure.
“With the hurricane and typhoon season yet to arrive for 2020, the insurance industry is braced for a turbulent future,” said GlobalData’s Senior Insurance Analyst, Daniel Pearce. “The unexpected losses associated with COVID-19 will place some providers under increasing financial strain.”
“The insurance industry will be impacted considerably in less direct ways than claims,” Pearce continued. “Insurers’ exposure to financial markets through the investments they hold has been negatively impacted, as financial markets globally have fallen to unprecedented levels.”
“Combining this with record-low interest rates, which have been set to provide some relief to economies anticipating recession, means the pressure on insurers’ balance sheets has increased dramatically.”
The economic impact will not only be felt through financial market volatility but also the potential downturn in the demand for commercial insurance as economies slide into recession and businesses are forced to close.
GlobalData noted that the extent to which this factor will affect the insurance industry will be dependent on how long it takes to get the spread of the pandemic under some form of control.
Should this be achieved in the coming months and restrictions on activities be eased, analysts believe a greater number of businesses will be able to recover.
“The combination of natural catastrophes, volatility in financial markets and economic recession will put the insurance industry under considerable strain,” Pearce added.
“However, the full impact will not be known until later in 2020 – once the majority of natural catastrophes pass and the severity of the economic implications become clearer.”
