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Impact of COVID-19 on US Insurance and Global Reinsurance Outlooks
ModeratorStefan Holzberger – Chief Rating Officer, AM Best
PanelistsJohn Andre – Managing Director, AM Best
Ken Johnson – Managing Director, AM BestSally Rosen – Senior Director, AM Best
Carlos Wong Fupuy – Senior Director, AM Best
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Property/Casualty Insurance
John Andre – Managing Director, AM Best
Market Segment Outlook – US Commercial Lines
Headwinds Tailwinds
Economic conditions driving lower
premiums and subsequently earnings
Solid risk-adjusted
capitalization and liquidity
Impact of lower asset values on
capital and surplusRates had been increasing pre-COVID crisis
Lower than expected interest rates for the
foreseeable future Potential for reduced loss exposures
Elevated “Other Liability” lossesEnhanced underwriting and ERM tools
driven by innovation
Potential Business Interruption losses
AM Best has revised the Stable Outlook on the US Commercial Lines Segment to Negative
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Change in Sub-Segment Outlooks – US Commercial Lines
Segment Outlook
Workers Compensation Negative
Excess & Surplus Lines Negative
Commercial Auto Negative
Professional Liability Negative
Medical Professional Liability Negative
Title Negative
Surety Negative
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Market Segment Outlook – US Personal Lines
Headwinds Tailwinds
Elevated frequency & severity of weather
patterns Strong risk-adjusted capitalization
Potential reinsurance pricing pressures –
particularly loss affected regionsOn-going underwriting and pricing discipline
Evolving customer and agent expectationsCore property performance
(excluding weather events)
Greater-than-expected operating impact
from COVID-19
Ample reinsurance capacity – increased use
of innovative/flexible structures
Continued equity market volatility Advanced pricing sophistication
AM Best has maintained the Stable Outlook on the Personal Lines sector
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Sub-Segment Outlooks – US Personal Lines
Segment Outlook
Personal Auto Stable
Homeowners Stable
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US Life/Annuity Insurance
Ken Johnson – Managing Director, AM Best
Market Segment Outlook – US Life/Annuity
Headwinds Tailwinds
Significant market volatility in
US and Global economyStrong risk-adjusted capitalization
Increased expectations for deterioration in
operating performance trendsImproved company-wide liquidity profiles
Accelerated negative impact from markets
on both assets and liabilities
On-going product de-risking and
pricing discipline
Concentrated investment strategiesRegular stress testing performed as part of
improving ERM profiles
Concentrated product strategies Innovation in U/W and customer experience
limits need for face-to-face interaction
AM Best has revised the Stable Outlook on the US Life/Annuity sector to Negative
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Sub-Segment Outlooks – US Life/Annuity
Segment Outlook
Life Negative
Annuity Negative
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Health Insurance
Sally Rosen – Senior Director, AM Best
Market Segment Outlook – US Health
Headwinds Tailwinds
Increase in severity of medical claims Strong risk-adjusted capitalization
Decline in premiums from layoff/furloughs Trend of strong earnings
Potential delays in payment from customersPrior to COVID-19, broad based trend of
lower utilization and medical cost trends
Temporary increase in financial leverage Suspension of non-essential care
Investment income & credit riskMajority who test positive are not
hospitalized
AM Best has maintained the Stable Outlook on the US Health sector
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Sub-Segment Outlooks – US Health
Segment Outlook
Supplemental Health Stable
Disability Insurance Negative
Long Term Care Insurance Negative
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Global Reinsurance
Carlos Wong Fupuy – Senior Director, AM Best
Market Segment Outlook – Global Reinsurance
Headwinds Tailwinds
Uncertainty regarding reinsured losses First loss estimates seem manageable
Recent volatility in investment portfolioFed / Central Banks stimulus packages,
potential for recovery post-crisis
Low interest rate environment Strong balance sheet positions
Economic recessionary pressuresHardening pricing condition potential for
reduced claims activity
Reduced third party capital appetite Permanence of traditional capital
AM Best has maintained the outlook on the Global Reinsurance sector at Stable
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Market Segment Outlook – Global Non-Life Reinsurance
Headwinds Tailwinds
Specialty lines of business potentially affected Existence of exclusions and sub-limits
Unrealized losses in investment portfolioHigh credit quality in fixed income portfolios
Low equity component
Low interest rate environment Strong balance sheet positions
Pressure on top line due to recessionary
pressures
1/1 and 4/1 renewals successful
Potential for reduced claims activity
Reduced third party capital appetite
Liquidity pressures
Hardening pricing conditions
(CAT, casualty, specialty)
AM Best has maintained the outlook on the Global Non-Life Reinsurance sector at Stable
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Market Segment Outlook – Global Life Reinsurance
Headwinds Tailwinds
Key biometric risk – mortality, to be affectedFocus on working age groups, less vulnerable
to COVID-19
Uncertainty regarding ultimate lossesCurrent estimates still well below 1:200 year
pandemic scenario
Low interest rate environment Good quality investment portfolios
Asset volatility Tight asset liability matching
Focus on biometric risks only
Morbidity exposuresRelatively small risk component
offsetting non-COVID claims activity
AM Best has maintained the outlook on the Global Life Reinsurance sector at Stable
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Sub-Segment Outlooks – Global Reinsurance
Segment Outlook
Global Non-Life Reinsurance Stable
Global Life Reinsurance Stable
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