Fitch Ratings’ reinsurance dashboard for the first nine months of 2020 suggests pandemic-related losses have started to fade.
Hannover Rueck SE, SCOR and Swiss Re all booked fewer pandemic-related claims reserves in 3Q20 than in 2Q20, as the actual loss experience did not require any major adjustments to expected claims in most of the affected business lines.
Fitch notes that exception to this was Munich Re, which added €800 million of claims reserves in 3Q20.
These are believed to to be mostly linked to event cancellation covers – where Munich Re is one of the global market leaders.
Fitch Ratings expects event cancellations to cause further claims in the industry in 4Q20 as several countries have re-established lockdowns.
Hannover Re, Munich Re and SCOR all remained profitable despite underwriting losses incurred in 9M20.
This is reportedly due to a comparatively light natural catastrophe loading and an improvement of the underlying underwriting result, adjusted for pandemic-related claims due to higher risk-adjusted prices.
The same factors helped Swiss Re to substantially reduce its net loss in 3Q20, which had been reported after six months.
Return on investment fell in 9M20 for all major reinsurers due to falling reinvestment yields and lower realised gains compared to the same period last year.
Fitch’s report notes how all four major reinsurers have been well capitalised so far in 2020, maintaining their capital levels within their set target ranges.
All of them issued subordinated notes to bolster the capital base in 3Q20, while only Hannover Re used all of the proceeds to immediately call existing subordinate d notes in the same quarter.
All major reinsurers have voiced cautious optimism for 2021 as they expected the hardening reinsurance market with risk-adjusted price increases to continue.
At the same time, changes in terms and conditions, such as excluding pandemic covers in new or renewed, should progressively reduce the pandemic-related claims burden in property and casualty reinsurance, Fitch believes.
Nevertheless, the uncertainty around ultimate losses caused by the pandemic remains high.
