Berenberg is anticipating Swiss Re to register a net loss of $389 million for 2020, up from the previous $178 million estimate, with COVID-19 claims driving the earnings downgrade for the year.
It’s worth noting that while this analysis applies directly to Swiss Re, the widespread nature of COVID-19 could result in other global re/insurers experiencing similar pressures.
Property and casualty reinsurance and Swiss Re’s Corporate Solutions unit are expected to experience further losses.
The lockdowns in Q4 2020 proved to be worse than Berenberg had originally envisaged; it had been hoped that the pandemic could be controlled by more regional/focused lockdowns.
The two main drivers of claims in Q4 are likely to continue to be business interruption and event cancellation.
However, Berenberg says the overall momentum of claims will diminish as the period of cover is being exhausted and new pandemic cover for event cancellation and business interruption is generally not being provided on renewal.
Therefore, 2021 should not face the same degree of headwinds from COVID-19 as 2020, irrespective of ongoing lockdowns.
Analysts forecast 2020 total COVID-19-related losses of $2.7 billion, up from $2.3 billion at 9M 2020, across P&C Re and Corporate Solutions.
US excess mortality are predicted to lead to more claims in life and health reinsurance. Swiss Re had previously said that, if there were an additional 100,000 excess deaths in the US, that would result in a loss of $200 million.
Given the ongoing mortality trends in the US related to the pandemic, plus excess mortality in the UK, Berenberg estimates life losses related to COVID-19 will rise from $0.7 billion to $1.0 billion.
Analysts would expect excess mortality to continue to affect the L&H re division in 2021 until there’s a return to normality with regards to death rates.
Q4 2020 natural catastrophe outcome is not expected to be benign. There were a number of medium to large catastrophe events in Q4, such as ongoing wildfires, hailstorms in Australia, flooding in Asia and late hurricanes.
Additionally, typically in Q4 a higher proportion of losses come through on aggregate contracts. Therefore, Berenberg believes catastrophe losses will be over budget for 2020.