In terms of turnover, corporate failures, the economic slowdown and the difficulties encountered by policyholders and individuals inevitably lead to a decline in premium income.
In terms of claims experience, the results of insurers heavily involved in the credit, aviation, event cancellation, business interruption, travel assistance and life insurance activities have been severely impacted by the crisis.
Swiss Re [4] estimates the amount of losses incurred by insurers due to the pandemic at nearly 55 billion USD. For Standard & Poor's, the losses of these same insurers would be set between 35 and 50 billion USD and those of reinsurers could amount to 20 billion USD.
Rating of insurers during the covid 19 period
Between 19 March and 2 June, 2020, the rating agencies [5] carried out a massive review of their files.
Fitch Ratings
Fitch Ratings [6] reported a 45% increase in the number of ratings carried out in Western Europe. Of the 155 ratings carried out by the agency, 25% resulted in a downgrade of the financial rating or outlook. This rate was 3% in 2019 and 9% in 2018.
Among the downgraded ratings are eight Italian insurers, the majority of whose ratings have been lowered by one notch. This negative development follows the downgrade of Italy's sovereign rating to BBB with a negative outlook.
These ratings assigned by Fitch in May 2020 were confirmed by the agency between 24 September and 24 October 2020.
The Italian companies concerned are named as follows:
- Assicurazioni Generali (A/Negative to A-/Stable)
- Vittoria Assicurazioni (A-/Negative to BBB+/Stable)
- Societa Reale Mutua di Assicurazioni (A-/Negative to BBB+/Stable)
- Intesa Saupolo Vita (BBB+/Negative to BBB/Stable)
- Unipol Sai Assicurazioni (BBB+/Negative to BBB-/Stable)
- SIAT - Societa Italiana Assicurazioni e Riassicurazioni (BBB+/Negative to BBB/Stable)
- SACE (BBB/Negative to BBB-/Stable) and SACE BT (BBB/Negative to BBB-/Stable)
- ITAS Mutua (BBB/Negative to BBB-/Negatively monitored)
In the United States, due to increased uncertainties regarding the pandemic and its impact on life insurers’ financial strength, the rating outlook for this class of business will go from stable to negative in March 2020.
At the same time, Fitch expects that a significant number of life insurers with stable outlooks would be downgraded to negative outlooks. This situation could lead to a downgrade of their rating in the short term.
Out of a sample of 47 insurance companies examined by Fitch as of 4 June 2020:
- 68% of the ratings were confirmed with a stable outlook,
- 24% were confirmed with a negative outlook,
- 2% were downgraded and placed on watch or within the framework of the Rating Watch Evolving,
- 2% were kept on watch.
Moody’s
Moody's [7], on its part, made a series of adjustments following the downgrade of South Africa's sovereign rating from Ba2 to Ba1.
Three insurers: Guardrisk International, Guardrisk Life and Guardrisk Company have been downgraded from Ba2 to Ba1. One last company, Discovery, is downgraded from Ba3 to Ba2.
A.M. Best
A.M. Best [8] has subjected insurers to a "Stress test" or resilience test that is designed, according to the agency, to evaluate "their risk-adjusted capital levels, investment portfolios, reserve adequacy and other aspects related to the risks taken by the insurer”. The agency also extended the deadline by one month for companies to submit their rating questionnaires.
Standard & Poor’s Global Ratings
Standard & Poor's [9] forecasts a limited impact of the crisis on insurers in the EMEA zone (Europe, Middle East and Africa). The agency justifies its analysis by the diversification of portfolios at risk and the strength of insurers' capital.
However, this position of principle has not prevented the agency from reviewing the prospects of some insurers in the region particularly impacted by the crisis in the credit, assistance, travel, ... classes of business. In addition, Standard & Poor's believes that the balance sheets of most stakeholders in the EMEA zone will be less robust because of their exposure to financial market volatility.
The crisis would therefore mainly impact the profitability of insurers who are poised to sustain a decline in their profits.
In the end, for the agency, insurers based in North America, Europe and the Middle East will exhibit better resilience to the crisis than their counterparts in other zones.
Given the extent of the damage caused by the pandemic worldwide and the higher number of rating downgrades, it is clear that the insurance sector is relatively resilient to the pandemic.
Moreover, European insurers have faced the crisis with some flexibility