COVID cost global multiline insurers around $8B
Among GMI rated by S&P, the past year proved to be an earnings event for the industry but capital remained unchallenged.
While 2020 was challenging, the impact on global multiline insurers (GMI) was limited, according to S&P Global Ratings, which noted the pandemic cost the 16 GMIs it rates around $8 billion. Overall, the rated companies saw net income of $36 billion for the year.
While one-off items related to COVID-19 reduced net income by about $12 billion, S&P noted the past year’s income represented an earnings event for the industry, meaning income was impact but solvency was not threatened. GMIs in commercial property & casualty lines were the hardest hit and accounted for more than half of the pandemic-related drop in net income among the 16 GMIs rated by S&P.
Marc-Philippe Juilliard, S&P Global Ratings analyst, said in a release: “As we had believed, the crisis has turned out to be an earnings event for GMIs, and a manageable one — not a serious capital event. That is, no insurer in this group fell into a position where its capital resources became insufficient to meet expectations by regulators, who would have advised the company to materially reduce its risk exposure or find additional capital resources.”
These results do not include all possible consequences of the pandemic, which could include unrealized capital gains, reserve adequacy, and new business volume and value, S&P reported. Additionally, the rating agency found that a number of companies, particularly with interests in life insurance, didn’t single out the pandemic as a key driver on financial reports.
The outlook for this sector is promising, as the rating agency anticipates a recovery in earnings for 2021 and beyond. Helping the sector through the past year was its good base of recurring profitability. Further, GMIs reported a large share of incurred but not reported losses in 2020 earnings.
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