Source: asiainsurancereview.com

The world’s four largest reinsurers recorded a 69% fall in net income in 2020. In 2019 the net income of these four insurers (Munich Re, Swiss Re, Hannover Re and SCOR) was EUR5.07bn ($6.04bn) and it fell to EUR1.56bn ($1.86bn) in 2020.

Reinsurers’ net incomes were hit by COVID-19 claims (EUR7.8bn) and lower investment returns according to a sector report by the rating agency Moody’s that confirms P&C business suffered the most.

Moody’s report says that further COVID-19 claims could follow in 2021, with the top reinsurers braced for pandemic losses to average about 10% of the amounts booked last year. The lines of business unaffected by the pandemic last year, such as D&O, could suffer some spill over effects in 2021.

The top four reinsurers, however, still face an uncertain final COVID-19 bill for 2020. This is because claims are subject to legal disputes between primary insurers and policyholders and the bulk of the losses are still accounted for as incurred but not reported (IBNR). Reserves for IBNR claims account for 70% to 80% of P&C reinsurance claims last year. COVID-19 claims fell just short of EUR6bn on P&C reinsurance in 2020 according to the report.

The majority of P&C COVID-19 reinsurance losses were booked to event cancellation and business interruption (BI) lines. Each of these accounted for about 40% of total reported COVID-19 claims. Swiss Re was the hardest hit by BI losses, which accounted for 57.8% of its total COVID-19 bill, against 32% at both Hannover Re and Munich Re. While event cancellation took the highest share of Munich Re’s COVID-19 losses at 55%, and caused 21.5% of losses at Swiss Re and 21.8% at Hannover Re.

Excluding COVID-19 losses P&C reinsurers recorded improved results in 2020, helped by higher rates. The top four reinsurers entered 2021 upbeat in their outlook. However, Moody’s says reinsurance prices remain well below the last hard market in 2012/2013. It adds that ‘pockets of risk’ remain, with underwriting results under pressure from weaker investment returns, an increase in natural catastrophes and rising liability claims.