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KBRA underlines potential for “material earnings event” over COVID-19

26th March 2020 - Author: Charlie Wood

Underwriting losses from the coronavirus pandemic, in particular on the P&C side, could become a material earnings event for certain industrial and commercial line insurers, according to analysts at Kroll Bond Rating Agency.

KBRAWhile insurers’ coronavirus-related disclosures have provided some reassurance given the current extreme circumstances, KBRA believes the crisis is a credit negative for the sector and will be especially challenging for those insurers without adequate risk management programs.

While there are many credit-negative implications to the virus, KBRA sees many insurers as well positioned to manage the crisis, continuing to serve their customers, creditors, and counterparties.

Insurers have yet to provide much quantitative underwriting data regarding COVID-19 but most have reiterated that standard P&C policies do not cover risks related to a pandemic.

This is in line with KBRA’s expectation, but they note that industry bodies and insurers remained silent with regard to nonstandard policies.

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Swiss Re indicated that it has a specific exposure of $250 million to the Tokyo Olympics and a mid-three-digit exposure to other potential event cancellations for the remainder of this year.

Overall, Swiss Re expects a 15% market share to event covers that could potentially be triggered by COVID-19.

There were also press reports that Munich Re has a three-digit exposure to the Tokyo Olympics.

KBRA maintains our view that there is significant uncertainty regarding large-ticket nonstandard policies underwritten by the major global insurance groups.

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