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SCOR very positive on hardening P&C market as it absorbs COVID-19 impacts

9th September 2020 - Author: Luke Gallin

Global reinsurer SCOR sees current P&C market conditions as very positive and is anticipating growth with solid pricing dynamics, as the company absorbs the impacts of the COVID-19 pandemic.

SCORThe French reinsurance company is the latest to note an expectation of continued rate hardening across the reinsurance sector, exacerbated by the ongoing impacts of the coronavirus crisis.

SCOR states that it is well placed to benefit from the expected significant, generalised and long-lasting P&C re/insurance market hardening, owing to its optimal solvency and the depth of its global franchise.

The firm says that it is absorbing the impact of the COVID-19 crisis, and notes that based on data currently available, information received from cedants to date and the results of models used, COVID-19-related claims in the Life segment are emerging better than booked at H1. At the same time, P&C claims are developing as expected.

Starting with the Life side of the business, and SCOR has revealed that claims are emerging better than expected on the U.S. reinsured portfolio, with €85 million paid as of August 31st, 2020, which translates to an actual over expected claims ratio of 62%.

On the P&C side of the business, the reinsurer notes that claims from COVID-19 are developing as expected, with unchanged assessment compared to H1 2020, with €3 million in claims paid as of August 28th, 2020.

In Q2 2020, SCOR announced a net loss of €136 million as the estimated cost of the COVID-19 pandemic booked in the quarter reached €456 million.

“Covid-19 is contributing to create the conditions for stronger growth with positive pricing dynamics,” says the reinsurer. Additionally, SCOR expects the pandemic to result in heightened risk aversion, which will in turn lead to higher demand for insurance and reinsurance coverage and stronger growth for reinsurance, on both the Life and P&C side.

Furthermore, notes the reinsurer, while there are clearly challenges for the industry from the low interest rate environment, SCOR’s prudent asset management has safeguarded the value of its investment portfolio since the emergence of the pandemic. The reinsurer has resumed its reinvestment strategy on credit markets and value creation assets. But first and foremost, adds SCOR, it extracts value from its underwriting operations.

Denis Kessler, Chairman and Chief Executive Officer (CEO) of SCOR, commented: “With the Covid-19 pandemic, SCOR has once again demonstrated its capacity to absorb major shocks combined with the resilience of its business model. Regarding the assessment of our exposure to the Covid-19 pandemic that we provided at the end of July 2020, on the P&C side, claims are developing as expected. On the Life side, at this stage, claims experience is emerging better than expected. In addition, the pandemic has also exacerbated society’s growing aversion to risk, creating the conditions to drive stronger growth for the reinsurance industry.

“SCOR is uniquely positioned to benefit from the hardening of the pricing environment and improved terms and conditions. SCOR is well on track with the execution of its strategic plan “Quantum Leap” with a faster than expected profitable growth prospect on the P&C side, and reaffirms its strategy based on consistency and transformation to enhance value creation.”

All of this commentary from SCOR came from its annual investor day, during which the firm also reaffirmed its “Quantum Leap” strategy, and provided an outlook for the remainder of 2020.

For SCOR Global P&C, positive growth in gross written premiums is expected, as COVID-19 impacts and pruning on the 2020 portfolio are expected to be mitigated by the strong growth of the 2018 and 2019 portfolios.

SCOR claims that the COVID-19 pandemic has accelerated a transformation of the life insurance sector, driven by increased demand for protection as consumer awareness of the importance of life and health coverage grows. For 2020, SCOR anticipates its Life business to generate a net technical margin at 5.5% to 6%, compared to the 5.2% to 5.4% announced during H1 2020.

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