Analysts at Fitch Ratings have noted that the H1 results of the North America property and casualty (P&C) re/insurance sector show “relative stability” despite the challenges of the COVID-19 pandemic.
Overall, operating performance for this sector declined over the first six months of 2020, as the pandemic hit underwriting results and investment earnings.
But Fitch maintains that North American re/insurers in particular proved resilient to the most adverse affects of the crisis.
“While the coronavirus pandemic created an unprecedented operating environment and heightened volatility across the global economy, midyear 2020 North American P/C (re)insurer underwriting results represent an area of relative stability, reflecting the industry’s robust risk management focus,” said Christopher Grimes, Director at Fitch Ratings.
While overall losses remain manageable for most insurers, losses from natural catastrophes and civil unrest outpaced claims from coronavirus induced losses.
Coronavirus-related losses reported by North America P&C re/insurers totalled $6.8 billion, while severe storm events over H1 led to elevated natural catastrophe losses of $7.0 billion, up from $5.6 billion in the prior-year period. Civil unrest-related losses totalled $751 million.
Pandemic-related claims increased the group’s overall combined ratio by 3.6% over the first half of the year, which was less than the impact of natural catastrophes and civil unrest reported during the period of 3.9%.
Fitch expects reinsurers to absorb the largest relative increase in underwriting results from coronavirus losses.
For instance, reinsurers reported by far the largest segment increase tied to the pandemic at 9.7% of earned premiums in 1H 2020.
And of the four companies in the overall group to report coronavirus related losses greater than 10% of H1 earned premium, three are in the reinsurer segment.
“While commercial (re)insurers reported the highest pandemic related losses, personal lines insurers benefited from a precipitous drop off in claims trends in the auto line that materially boosted underwriting results,” Grimes explained.
That said, insurers endured unprecedented disruption in early 2020 and Fitch believes that the industry has demonstrated an ability to adapt to widely changed socio-economic conditions.
Reserve development was similarly stable overall and P&C re/insurers reported strong capital levels at mid-year 2020.
