Covid-19 to impact insurance markets’ growth rates

Growth rates of insurance markets in Switzerland, the Netherlands and Australia will all be negatively affected by Covid-19, according to a series of reports from data and analytics firm GlobalData. The total Swiss insurance market is set to grow at a compound annual growth rate (CAGR) of 2.1% between 2020 and 2023, from £52.0bn in 2020 to £54.3bn in 2023. The CAGR has fallen to 0.1% for the period due to the severe impact of Covid-19 across a range of product lines including holiday, healthcare and transport-related insurance, says a report from GlobalData. It states that as the country’s tourism industry grinds to a halt amid the pandemic lockdown measures imposed by the Swiss government, hotel bookings have declined sharply – which will lead to a decline in insurance spend from businesses, which will no longer need lines such as public liability. The travel and motor markets will also be hit while the country is locked down, says the report. Deblina Mitra, insurance analyst at GlobalData, said: “Unlike other countries, if no pandemic exclusion is written into the policies, then Swiss insurers have to pay out. Given the mandatory status of private health insurance, the cost of Covid-19 tests and all prescribed treatment and hospitalisation charges will be covered under the basic healthcare plan.” While healthcare insurance policies written since the outbreak will not cover Covid-19-related treatments, GlobalData says it expects the industry to introduce sharp increases in premiums next year to make up for the overall expected losses. It adds that in the transport sector, loss or damage to goods due to Covid-19 is typically covered under transportation insurance, but standard insurance does not cover loss due to delays caused by Covid-19 shutdowns. In the Netherlands, economic uncertainty and declining financial markets are expected to impact a range of Dutch insurance products. Ms Mitra said: “A rise in economic uncertainty amid the countrywide lockdown is expected to impact surety insurance and trade credit. The slowdowns and trade restrictions will impact the repayment of trade credits and investment loans, resulting in an increase in claims demand for the insurers.” She added: “Another line struggling amid the pandemic is construction and manufacturing. The lack of migrant workers and supply chain disruptions due to travel bans and lockdown is causing severe deterioration in this market. This, coupled with disruption in the distribution framework of the engineering sector and the lack of agricultural production, will decrease the growth potential of the property insurance sub-segment.” Australia’s insurance industry, meanwhile, is expected to see decelerated growth during the next five years due to the challenging business environment and Covid-19, says GlobalData. It is projected to decline by 1.3% from A$115.7bn ($80.5bn) in 2019 to A$114.1bn ($77.5bn) in 2020. Between 2019 and 2024, Australia’s insurance industry is now forecast to grow at a CAGR of 1.8%, compared to the previous estimate of 4.2%. Motor and property insurance will feel the most impact from the economic slowdown, with vehicle sales expected to decline by 30% in 2020, and a government ban on property auctions that has stalled the market. According to GlobalData, all of this adds to the pressure on the insurance industry’s profitability, which is already facing high claims from recent bushfires. Sangharsan Biswas, insurance analyst at GlobalData, said: “Australia’s economic growth is expected to sharply decelerate in 2020 due to the disruption from Covid-19 outbreak. The projected recession will be first for this country in the past 30 years and will adversely impact the short-term growth of the country’s insurance industry.”

Covid-19 to impact insurance markets’ growth rates

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