Skip to main content
Survey Report

COVID-19 Willis Re Report 1st Edition

Property|Reinsurance|Securities
COVID 19 Coronavirus|

April 23, 2020

COVID-19 has affected every societal and economic level imaginable. It is impossible to predict how this “black swan” event unfolds over the short term, it will impact our industry permanently as stakeholders consider the lessons of a threat that has a global footprint impacting the whole industry.

We are pleased to provide the first Willis Re report focussing on the pertinent issues developing out of the global COVID-19 pandemic affecting the global (re)insurance industry. With uncertainty in both the magnitude and breadth of impact and uncertainty over the expected time horizon, we felt it important to provide an assessment of the current landscape and how best to plan and navigate over the coming weeks and months. We will provide further updates as the landscape evolves in the months ahead; meanwhile, this report focusses on four central themes.

  1. The first is an economic and financial overview of the global life and non-life (re)insurance industry, broadly concluding that solvency, while dented, remains robust at an aggregate level albeit with regional nuances. Furthermore, the industry is experiencing an unexpected increase in loss activity with events being provisionally notified to the (re)insurers. The industry is built for extreme scenarios, and while H1 operating results may make disappointing reading for investors depending in large part on how (re)insurers address the complex reserving challenges of COVID-19. From a resilience perspective, the industry continues to cope thus far, albeit with legislative threats with severe and potentially existential consequences. This can be found in Sections 2 and 3.
  2. The second considers the impact of some shrinkage of the global industry’s “balance sheet” and what that might portend in the (re)insurance supply-and-demand equation notably for capital-intensive portfolios. This can be found in Sections 3 and 4.
  3. The third is an overview of how companies might plan for the balance of the year. Facing uncertainty on the asset side, parts of the loss side and a customer base substantially impacted by a global economic slowdown requires scenario- and forward-planning that reflects the potential impact on balance sheets, risk appetite and adjustments to external risk-financing strategy. This can also be found in Sections 3 and 4.
  4. Finally, we have provided an initial assessment of the market dynamics by individual lines of business or specialist segments or territories where relevant. The picture is developing rapidly at a regional and often micro-segment level with a growing number of examples where coverage for business interruption was explicitly provided. For each segment the perception of exposure to COVID-19 and the scrutiny in terms of loss activity, ongoing underwriting strategy or coverage varies widely. The indirect impact across the non-life risk spectrum will vary; concerns over frequency in casualty classes are offset by significant reductions in economic activity, and in the case of Motor insurance, there are significant reductions in mileage driven. This can be found in Sections 5 to 8.

This overview seeks to provide guidance on the critical immediate tactical issues, how and where clients might focus, and how they can prepare for both new and renewal (re)insurance placements going into the market. This is not the chosen medium to debate the strategic issues of state versus private sector pandemic risk finance, nor is it the forum to forecast the impact of political intervention in coverage, notwithstanding that it represents significant uncertainty for the global (re)insurance industry. This will no doubt surface in subsequent editions.

While this report is current as of the time of publication, the situation is fluid; for that reason, we aim to provide an update as the situation dictates.

In the final analysis, as the global life and non-life insurance industry’s secondary market, the reinsurance industry plays an essential role providing surrogate capital to manage volatility, which presently has enhanced value. With stress points possible in periods of uncertainty, we urge all parties to retain focus on their long-term requirements where they may need to work out issues. Opportunistic or capricious behaviour is unlikely to be rewarded as history consistently confirms that balanced and reasonable behaviour during uncertain times has defined standing and enhanced franchise value.

Contacts

James Kent
CEO, Willis Re

Paddy Jago
Global Chairman, Willis Re

Andrew Newman
President, Willis Re

Graeme Moore
CEO, Willis Re Specialty

Tony Melia
CEO, Willis Re International

James Vickers
Global Chairman, Willis Re International

Mark Hvidsten
Deputy Chairman, Willis Re

Brian Ingle
Co-Head of Global Analytics, Willis Re

Chris Brook
Global COO, Willis Re

Download
Title File Type File Size
COVID-19 Willis Re Report 1st Edition PDF 4.7 MB
Contact Us

Related Capabilities