Insurance Europe highlights impact of Covid-19 on insurance industry

The European insurance industry has remained solid throughout the pandemic, with firms generally maintaining their solvency positions. although it has presented insurers with unprecedented challenges, according to Insurance Europe.

In its response to a consultation by the International Association of Insurance Supervisors (IAIS) on the impact of Covid-19 on insurers, Insurance Europe states that while the pandemic has already had a significant impact on the sector, it will take time for many of its consequences to fully materialise – this is particularly true for claims, where a clear picture will only become apparent in the medium to longer term.

Insurance Europe states that losses for the insurance sector related to Covid-19 are expected to amount to an estimated $50bn-$100bn, but the impact is not the same in all markets.

“A certain level of supervisory flexibility is therefore crucial to enable insurers to adapt their products and services to new market realities,” says Insurance Europe. It adds: “In terms of risks for the insurance sector, the industry is particularly concerned about conclusions being drawn too fast and inappropriate actions being proposed as a result. It is important that the IAIS and its member supervisors adopt a long-term perspective in their assessment of Covid-19’s impact, particularly in terms of issuing guidelines and measures.”

It continues: “For general insurers, a major concern over recent months has been the potential for legislative action in different jurisdictions to retroactively amend insurance contracts in order to cover pandemic risks, especially for business interruption policies. This remains a significant concern and we highly appreciate the statement of 7 May made by the IAIS warning against any such legislative action.”

In its response, it says that while the insurance industry recognises the benefits of a risk-based and market-consistent regulatory approach, for these aspects of any regulatory framework to be truly effective, they must reflect the long-term nature of insurance and the sector’s risk management and asset/liability management.

It adds: “The experience of Covid-19 has also confirmed that any modification to prudential frameworks, in Europe and beyond, should be comprehensively tested to ensure their efficacy in a variety of stressed market conditions.”

It also states in its response: “Going forward, it is essential that all stakeholders understand that insurance is dynamic (capacity will contract and expand with changing circumstances), contractual (the wording of the contract is crucial to insurers’ reserving and customer relations), constrained by sometimes conflicting regulatory requirements and significantly affected by the availability and price of reinsurance.”