Two of the world’s largest reinsurance firms are warning that while the immediate losses caused by the global COVID-19 coronavirus pandemic may be largely reserved for, both expect a longer-tail of exposure to develop over time.
There is great uncertainty over the potential for the COVID-19 pandemic to drive losses to longer-tailed lines of insurance and reinsurance, particularly casualty and liability lines.
Both Swiss Re and Hannover Re caution that losses are likely to manifest as time passes though, with each warning of the potential for claims to escalate due to litigation and legal actions in the wake of the pandemic.
That stands well short of some industry estimates for where the pandemic will eventually drive losses to and longer-tailed lines are one area additional claims could emerge.
Speaking at Morgan Stanley’s 17th European Financials Conference this week, both of the reinsurers warned the loss burden from the pandemic cannot be considered to be over, or reserved for, yet.
Hannover Re executives warned of the long-term uncertainties that might emerge in the wake of the Covid-19 pandemic, with adverse claims trends due to litigation and loss creep both cited.
Longer-tailed casualty lines may be exposed to litigation, which could drive an unknown amount of future losses.
In particular, it seems business insurance, D&O and other areas of employment liability insurance, could be areas that fresh losses emerge over years to come, we’d suggest.
In shorter-tailed lines, Hannover Re’s execs said that loss creep could emerge because of the disruption experienced in the claim adjustment process during the pandemic itself.
Meanwhile, executives from Swiss Re said that more court cases are to be expected in the wake of the pandemic and that these will add to legacy trends in insurance and reinsurance, hence long-term casualty trends may be an issue for some.
In contrast to Hannover Re though, Swiss Re is confident that loss creep won’t emerge in shorter-tailed lines and losses already reported from the pandemic and doesn’t see any risk of loss adjustment inflation occurring.