Global insurers to feel coronavirus impact through financial market volatility

Global insurers and reinsurers are exposed to the coronavirus outbreak directly through a potential spike in claims, and indirectly through the impact on economic growth and the resultant financial market volatility, Moody's Investors Service has said in a report published today.

“European insurers' Solvency II ratios are particularly sensitive to financial market volatility and movements in bond yields and credit spreads,” said Brandan Holmes, a vice president, senior credit officer at Moody’s. “Sharp deterioration in financial markets over the past week will weigh on insurers' profitability and capitalisation.”

An economic slowdown triggered by the outbreak will crimp business volumes for insurers and also lead to higher claims for certain types of insurance, including trade credit and event cancellation insurance, Moody’s said. It also expects weaker investment returns on insurers' investment portfolios, including losses on equity exposures.

“For global insurers, mortality levels would need to rise significantly to trigger a substantial rise in claims for life insurers, although there is still a lot of uncertainty as to the ultimate level of deaths,” said Moody’s.

More broadly Moody's believes that non-life insurers' exposure is limited and consequently doesn't expect a significant claims impact.

While global reinsurers’ exposure to Chinese life and health insurance, and critical illness cover in particular, has grown significantly in recent years, it remains a modest part of their overall portfolios. Life and health cover also accounts for only a small share of the wider Chinese market, which is savings focused, Moody's noted.