Analysts at Moody’s have highlighted better overall property and casualty (P&C) results among the largest four European reinsurers, which they say are mainly a function of significantly lower COVID-19 losses than in 2020.
For P&C business, new COVID-19 claims fell in 2021 as the companies introduced in their policies wording to explicitly exclude most pandemic-related claims.
And despite some court rulings over pandemic-related business interruption losses that went against the insurers and led to an upward revision of some claims estimates in 2021, these were generally minor, and in most cases did not trigger additional contributions to COVID-19 claims reserves.
According to Moody’s, on average, COVID-19 claims added 0.8 percentage point to the P&C reinsurance claims ratio in 2021, down sharply from the significant an 8.5 percentage points in 2020.
However the rating agency also noted taht significant share of the reinsurers’ COVID-19 claims reserves are still booked on an “incurred but not reported” (IBNR) basis, despite the significant time that has passed since the start of the pandemic.
“This is because primary insurers often lack full visibility over their ultimate claims costs, particularly when the final outcome depends on court decisions regarding disputes with policyholders,” the firm explained. “While there is therefore some lingering uncertainty around the final COVID-19 claims bill, most reinsurers appear confident in their current reserving levels, and we believe that the potential for negative surprises is limited.”
Contrary to P&C, life reinsurance results deteriorated in 2021 among Europe’s largest reinsurers, reflecting an increase in pandemic-related mortality claims.
However, Moody’s still argues that life reinsurance margins held up relatively well when COVID-19 losses are excluded, highlighting the segment’s good underlying profitability.
Contrary to expectations, life mortality claims for 2021 exceeded the total for 2020, the first year of the pandemic, rising to €3.7 billion from €1.8 billion, with the US accounting for the bulk of the increase, reflecting the higher prevalence of mortality protection in older cohorts in this country.
Moody’s reports that the reinsurers expect mortality claims to spike in the first quarter of 2022, but to fall relative to 2021 over the year as a whole, although it caustions that the future claims trajectory is uncertain.
“We believe the potential emergence of new coronavirus variants, coupled with possible changes in governments’ and broaders societies’ approach to dealing with COVID-19, could also lead to negative surprises in terms of excess mortality,” the firm warned.
Munich Re reported profit of more than €2.9 billion for the 2021 financial year, with COVID-related losses of €212 million in its P&C segment and claims worth €785 million in its Life segment.
Swiss Re likewise returned to profitability in 2021, generating net income of $1.4 billion for the year, despite a heavy burden from natural catastrophes and additional COVID-related losses. While COVID-19 losses dwindled on the P&C side of the business, Swiss Re’s Life and Health (L&H Re) division incurred substantially higher pandemic-related claims of nearly $2 billion.
At Hannover Re, net income increased by 39% to €1.23 billion, despite €582 million of COVID-related losses in its L&H business, although the company expects the pandemic to have no substantial effect on its L&H result going forward.
And finally, SCOR reported an almost 95% rise in net income for 2021 to €456 million, with COVID-19 losses for the year, net of retrocession and pre-tax, totalling €575 million.