Property and casualty re/insurers in Germany are only expected to see a limited impact from the downturn in equity markets as a result of the ongoing COVID-19 coronavirus pandemic, reports actuarial consultancy firm, Meyerthole Siems Kohlruss (MSK).
The reason for such a limited impact is down to the fact that stock markets only account for 1% of German P&C insurers capital investments, says MSK.
Of course, there’s expected to be some variation in the experience for individual companies, as those firms that invest in higher-risk classes can be hit harder than others.
Furthermore, Dr. Andreas Meyerthole, co-founder and managing director of MSK in Cologne, notes that the decline in value of bonds during the current crisis also stands to lower the solvency ratio across the marketplace. Assuming a 10% reduction in bond prices equates to a decline in the SCR coverage of around 20% across the market, he explains.
As with any global crisis, there will undoubtedly be winners and losers across the insurance industry, and MSK underlines the adverse impact on both trade credit and business closure insurance.
In Germany, it’s been reported recently that the government and the region’s credit insurance industry have agreed on a plan under which the government would provide up to €30 billion for the commercial insurance space, designed to ensure the sector can operate despite the impacts of the pandemic.
MSK says that this public-private partnership shows that as in other industries, the insurance sector requires government support to be able to overcome the current crisis.
In contrast, private liability and accident insurance are two lines anticipated to experience benefits from the current crisis, as restricted mobility results in less people on the roads, fewer miles driven, and ultimately reduced levels of accident frequency. Reportedly, car accidents have declined by 50% since the shutdown.
According to Onnen Siems, MSK co-founder and managing director of the company, “By the end of April, the industry is likely to save more than €1 billion in claims expense.”
Looking forward, and MSK feels that lessons will be learnt around risk diversification and the assessment of supply chains.
“In principle, globalization is not bad – but the ‘single point of failure’ risks and their networking must be assessed and managed with professional (and actuarial) know-how,” says Siems.
MSK also comments on calls for the right of compulsory insurance surrounding the coronavirus pandemic, but says that the industry’s answer will be “that pandemic risks are not insurable.”