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COVID-19 and (re)insurers’ financial health

Reinsurance|Insurance Consulting and Technology
COVID 19 Coronavirus|Insurer Solutions

July 2, 2020

Willis Re’s Strategic and Financial Analytics teams continue to monitor the financial impact on the global (re)insurance sector due to the COVID-19 pandemic.

We are pleased to share Willis Re’s latest assessment of COVID-19 and the impact on (re)insurers’ financial health. To access the full report, download the PDF provided below.

Key takeaways:

  • The negative impact of investment markets on capital positions has nearly erased. For the global reinsurance industry, having hit -30% when markets were bottoming in March, we estimate the impact on capital is now only -7%.
  • Bottom-up COVID-19 loss announcements now stand at $6b, or $13b if companies’ projections of full-year losses are included. Either way, this is a long way from top-down industry loss estimates of $30-100b, and we expect the bottom-up versus top-down gap to take a long time (likely years not months) to close.
  • Capital raising is the new hot topic, and we put COVID-related capital raising at $16b. Investors are seemingly supportive, with a number of companies posting strong share price performance upon announcing a capital raise.
  • Putting together current asset-side hits and potential loss recognition, we do not see COVID-19 as a capital event for the industry. If investment markets stay at their current level, we calculate that the global reinsurance sector might end 2020 with a decline in capital on the order of only 8%.
  • Rating agencies are maintaining a cautious stance, with S&P having moved to a negative outlook on the global reinsurance sector. S&P expects the global reinsurance sector’s return on capital to undershoot its cost of capital again in 2020, having met its cost of capital only one year in the past three.
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COVID-19 and (re)insurers’ financial health PDF .4 MB
Contacts

Brian Shea
Willis Re
Managing Director, Strategic and Financial Analytics

Raj Bohra
Willis Re
Executive Vice President

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