Kroll Bond Rating Agency analysts do not generally expect a major impact from COVID-19 on underwriting results in the Life and Health segment while the mortality rate remains substantially lower among the younger age groups than in those over 50.
Furthermore, KBRA expects potential mortality spikes to fall within risk management parameters for insurers with robust risk management practices.
In developed countries, the number of fatalities compared to the total insured population still gives analysts reason to believe that assumption changes will not become necessary.
Hannover Re disclosed that a 5% mortality increase over a one-year period would result in additional life reinsurance claims of around €130 million.
This threshold translates into 135,000 additional deaths in the US, 30,000 in the UK, and 50,000 in Germany. Hannover Re also noted that COVID-19 fatalities were overwhelmingly in the elderly cohort and the mortality among the insured population is significantly lower.
However, top-line impacts on new sales could vary significantly by products. As employment rates plunge, analysts believe the volume of employee benefits business will follow.
The significant drop in interest rates will make fixed annuities less attractive to purchasers while, in contrast, traditional whole life insurance may hold increased appeal given the turmoil in the traditional investment markets.
Cash value life insurance products tend to have a minimum guaranteed rate of return which, in today’s environment, may be an attractive alternative to returns available elsewhere.
Life insurers may lower the offered guaranteed returns, but these products could remain relatively attractive given the stability of a guaranteed return.
Another consideration worth noting is for the kinds of product design features or underwriting processes that could change as a result of the coronavirus pandemic.
According to press reports, some life insurers are instituting waiting periods before the processing of applications, in particular for those who have traveled to certain countries and/or have been in contact with someone who has been diagnosed with COVID-19.
KBRA says it is too early to know the extent to which waiting periods could be lengthened in duration or even extended to all applicants.