Covid-19 P&C impact equivalent to mid-sized cat loss event: Moody’s

Moody’s Investors Service believes that the property and casualty insurance and reinsurance industry loss impact from the global Covid-19 pandemic will be somewhere in the range from $50 billion to $80 billion, which is around the middle of current estimates.

The overall P&C market impact from coronavirus related losses is likely to only be the equivalent of a mid-sized catastrophe industry loss event, the rating agency said yesterday.

“We see the industry as resilient overall, and believe it will be able to absorb the impact of the pandemic, leaving its capital broadly intact,” explained Christian Badorff, a Vice President and Senior Analyst at Moody’s. “The most severe long-term impact will likely be continued pressure on the sector’s investment returns due to a further fall in interest rates and an expected increase in corporate defaults.”

The majority of the Covid-19 loss hit is expected to fall to event cancellation, business interruption and travel insurance policies, Moody’s explained, while some P&C insurers will also see benefits as an expected sharp decline in motor insurance claims will offset some of the pandemic claims burden.

While the coronavirus pandemic will hurt the profits of insurance and reinsurance companies, Moody’s expects this will be manageable.

Commenting on the European insurance industry specifically, Moody’s said it “is resilient overall and will be able to absorb the impact of the coronavirus pandemic.”

In fact, the most significant impact is expected to be the ongoing pressure caused by lower-for-longer interest rates, with life insurers more exposed than the P&C industry here.

But overall, the rating agency sees the pandemic as an earnings rather than a capital event.

The range of estimates of industry losses from Covid-19 is wide, at roughly $30 billion to $100 billion+.

In our recent survey, the majority thought the non-life insurance and reinsurance industry is deemed most likely to face more than $80 billion of underwriting losses due to the Covid-19 coronavirus pandemic.