By Adedapo Adesanya
Global insurance is under threat of recording losses for the remainder of the year and may not see record profits until the second half of 2021 as a result of the effects of the coronavirus pandemic.
This is according to Fitch Ratings, which believes that the commercial insurance industry will probably report significant losses in 2020 and H1 2021.
This is despite the fact that insurance rates have been steadily rising for the past nine consecutive quarters due to large catastrophe loses and accelerating claims inflation.
Following this, most commercial insurers will likely see technical profit until the second half of 2021, the rating firm said in its report titled Commercial Insurance Market is Hardening.
According to Fitch analyst, Mr Robert Mazzuoli, “The coronavirus pandemic will burden 2020/1H21 results but will ultimately accelerate the hardening of the commercial insurance market.”
Commercial insurers will be hit hard by pandemic-related claims that affect event cancellation and credit and surety policies. These claims will run through this year, up to the end of the first half of 2021, said the report.
Other niche businesses, such as media or travel insurance, will also see large losses.
“While, in general, pandemic-induced business interruptions have not been covered by commercial insurers since the SARS pandemic in 2003, unclear policy wording and political pressure now raise increasing doubts how successfully commercial insurers can fend off claims now,” the agency noted.
Fitch explained that reinsurance cover is unlikely to provide much relief as pandemics are usually excluded from business interruption policies.
Further, the whole insurance industry will have to deal with investment losses, calls for rebates in lines of business that see a significant drop in claims, such as motor, and an increasing number of defaulting customers.
Fitch also noted that it does not expect new capacity to enter the commercial insurance market over the next two to three years until there is a recovery from pandemic-related losses.
