Digital channels aid April renewals amid travel chaos

March 25 2020 by Andrew Tjaardstra

The reinsurance sector is clearly under pressure from the impacts of Covid-19 but it has been business as usual – although in more of a digital way – for the April 1 2020 renewals.

The overall sector is under pressure from the outbreak but the fundamentals of the protection needed for the P&C market hasn’t changed in India, Japan and South Korea enough in time to effect the renewals season.

The market can expect relatively normal renewal volumes but with some rate hardening after a string of nat cats in recent years.

Digital world
Insurance execs have long been used to work travel and face-to-face meetings, in and out of the office, to keep up relationships but more importantly to iron out complex contract discussions.

“I was able to successfully engage with multiple team members to arrive at underwriting conclusions as if I had been in the office and working under [a] normal routine.” Chris Kershaw, Peak Re

The intensive travel lockdowns across Asia – which have been changing by the hour – has meant that many first quarter business meetings have been curtailed, staff have been working from home or employees have been placed in isolation on return to their base country.

Those business continuity plans that brokers have long advised their clients to have in place are now being used by the market.

Many of the April reinsurance renewals have moved to email and video conferencing and the market has reacted in a calm, responsible manner. In addition claims have also been moving online.

Chris Kershaw, managing director – global markets at Peak Re, commented in a recent blog post published on social media: “With renewal seasons in train for India and Japan, two of our major markets with significant contract volumes, I was able to successfully engage with multiple team members to arrive at underwriting conclusions as if I had been in the office and working under [a] normal routine.”

Clearly some firms, and indeed individuals, are better prepared than others for this paradigm shift. InsuranceAsia News has heard issues such as bandwidth issues, cloud capacity, access to important files and security issues.

In such a difficult environment, we are lucky to live in a digital world where social media has developed to the extent where large files can be shared at the touch of a button. However, firms will need to keep their investment up in this space.

However, one senior exec at a reinsurance broker told InsuranceAsia News that the travel shutdown was hitting its ability to conduct new business development.

Impact on reinsurers
Covid-19 is a fast moving and potentially game-changing situation for the market but it is still far too early to tell the overall impact.

“Even in the very unlikely scenario of a worldwide pandemic equivalent to a 200-year event, insurance claims are expected to be similar in scope to a medium-sized natural catastrophe in P&C reinsurance.” Munich Re statement

Governments are wading a delicate line between the health and wealth of their citizens in a real time situation without a handbook to guide them.

While Fitch Ratings has downgraded some global reinsurers’ outlook from stable to negative, it is still too early to tell about the overall impact on the market.

Munich Re has issued the following statement: “Although a severe global pandemic is the largest possible accumulation risk in this category – especially since pandemics are of course not excluded from life and health insurance – we don’t currently anticipate the severity to reach several hundreds of thousands of casualties worldwide.”

The statement continued: “Even in the very unlikely scenario of a worldwide pandemic equivalent to a 200-year event, insurance claims are expected to be similar in scope to a medium-sized natural catastrophe in P&C reinsurance.”

It is a similar wait and see environment at Swiss Re.

Swiss Re’s chief financial officer John Dacey has said: “There are potential impacts from this pandemic on our P&C and life & health businesses. We assess all of these potential impacts to be entirely manageable at this point. With respect to event management and cancellations related to specific events, we believe we have an overall market share of approximately 15% to event covers that could be claimed due to Covid-19.”

Both reinsurers have an exposure to the postponement of the Olympic games, although it has yet to be revealed the contract details around a delay.

APAC P&C outlook
Fitch Ratings has also revised the Asia Pacific P&C sector outlook to negative based on near-term performance and the credit quality of insurers.

The slowdown in economic activities will affect Asia-Pacific demand. For example, a prolonged decline in new motor vehicle sales will hurt overall market as motor is still the most dominant business line for the APAC non-life sector. However, APAC P&C players’ exposure to lines directly vulnerable to the coronavirus pandemic is relatively modest.

In a note Fitch said: “We don’t anticipate a significant increase in loss ratios in the near term due to the claims experience from these events, but uncertainty regarding future sources of underwriting losses will expand as the duration and severity of the crisis lengthen. APAC non-life insurers’ risky asset exposure is generally lower than that of life insurers, but increased financial market volatility could weaken investment performance and solvency stability.”

Work
While clearly the most important priority is for the market to keep their employees and families safe – business must also continue as usual as much as possible.

Technology, good communication, transparency and knowledge will be key in these challenging times.

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