The COVID-19 pandemic has contributed to a surge in demand for reinsurance and according to analysis by Fitch Ratings, this is no short-term trend.
Speaking for the ratings agency in its Mid-Year 2020 Financial Results EMEA webinar was Brian Schneider, Fitch Ratings’ Senior Director and Global Head of Reinsurance.
As primary insurers react to the challenges of the global pandemic, there’s been a notable rise in demand for reinsurance protection.
While it’s unclear if a significant flurry of startups will appear to make the most of the opportunity, capital raises have been plentiful across the reinsurance sector amid a hardening landscape.
During the webinar, Schneider commented on how demand is likely to continue into the future as insurers consider the risk of another economic disaster and look to shore up balance sheets.
“I think it’ll be more in the long-term. I think the primary insurers are just dealing with another level of uncertainty here,” said Schneider.
Of course, this increase in demand for reinsurance coverage is happening at a time when rates are moving higher, a trend exacerbated by the COVID-19 pandemic. As a result, insurers will have to manage the higher costs of reinsurance, explained Schneider.
“They have more higher pricing to pay for the cost of reinsurance as well but at the same time, they’re getting pricing increases as well on the primary side. They’ve actually been getting it longer than the reinsurance pricing has gone up,” he said.
Adding, “I think as they look to manage their risk, this is something that they’re going to want to continue to increase their demand for reinsurance, certainly in the near-term and I would think in the long-term as well.”