The Coronavirus pandemic continues to spread across the globe causing disruptions to individuals and organizations, including mandated lockdowns.  During this time, insurance companies have incurred underwriting losses as a result of the outbreak. However, potential losses are not limited to insurance underwriting losses. Equity market fluctuations and cuts in interest rates by central banks around the world to limit the economic fallout from the pandemic have also affected investment income of life and P&C insurance companies due to the fluctuations in realized and unrealized market losses.

Property & casualty insurance companies have also been subject to litigation around business interruption claims and settlements, which can result in additional losses in the near future. Moreover, an active year in terms of natural catastrophes such as hurricanes and wildfires is adding to P&C insurers’ worries; however, the industry remains well capitalized and supported by an increase in general premiums levels that began well before the pandemic. On the life insurance side, the impact of mortality and morbidity remains manageable and quantitatively lower than pandemic scenarios these companies typically use in their stress tests and capital calculations. Nevertheless, given life insurance companies’ sizable investment portfolios, market volatility has taken a toll in their profitability. For both segments, a prolonged global recession could also trigger a general deterioration in the credit quality of their bond portfolios due to defaults and credit downgrades.

Key takeaways:

• Credit profile of insurers have been more affected by financial markets volatility than underwriting losses related to the pandemic
• Litigation and settlement of business interruption insurance claims remain an area of concern for P&C insurers
• Mortality and morbidity risks still manageable relative to stress tests and scenario planning of life insurance companies
• Most insurance companies are better capitalized today than they were during the Global Financial Crisis

About Our Expert
		Marcos Alvarez is a Senior Vice President at DBRS Morningstar, where he heads the insurance ratings practice based out of Toronto, Canada. Marcos has more than a decade of experience assessing and managing credit risk of global insurance and reinsurance companies, including negotiating credit terms of lending and derivatives contracts during previous roles at global financial institutions in Canada and the United States. He started his insurance career as a property and energy underwriter for AIG more than 15 years ago. Marcos has a background in economics and a Master of Business Administration from the Rotman School of Management at the University of Toronto.

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