With Covid-19 losses increasing sector risk premiums, the presence of higher rates across most lines is creating opportunities for margin expansion and driving a continuing inflow of new investment capital, according to David Flandro, Managing Director at HX Analytics.
In a presentation given during the company’s third quarter earnings update, Flandro highlighted how premiums have grown in every quarter this year despite reduced economic growth expectations, driven by rising prices and increased business volume.
This counter-cyclicality is reportedly proving attractive to new investment capital in the current environment.
Elsewhere, Flandro notes how the level of global catastrophe losses has so far been only slightly elevated, despite the US exceeding expectations with a record number of Atlantic Basin windstorms this year.
Covid claims have contributed $26 billion of the year’s $95 billion total insured losses to date, Flandro does not consider this a ‘game changer’ in terms of loss quantum alone.
Generally conservative reserving trends seen early in the year have eased as confidence grows, and insurers capitalise on rate movements, Flandro added; indications are that the peak of Covid losses have been accounted for enabling capital deployment for growth.
“As we come to the end of an incredibly difficult year, the overall outlook for the insurance sector is nevertheless positive, allowing insurers to focus on revising growth targets upwards, attracting capital for underwriting expansion, and enhancing the use of rich data to transact risk more efficiently and effectively,” Flandro explained.
