business interruption

The collateralised reinsurance sidecar market and private quota share transactions entered into by insurance-linked securities (ILS) funds and investors may face the highest impacts from Covid-19 pandemic related claims, A.M. Best has said.

The United States Treasury has shown in a letter that it is opposed to legislative moves that could force retroactive business interruption claims related to the Covid-19 pandemic onto the insurance and reinsurance industry.

The Covid-19 pandemic is unlike anything else ever encountered by the re/insurance industry and will be a headwind for future reinsurance capacity, according to AIG’s Global Chief Operating Officer and CEO of General Insurance Peter Zaffino.

A new report from A.M. Best highlights the potential damage that any legislative moves to force retroactive business interruption claims into the insurance and reinsurance industry could cause, saying that as much as 50% of re/insurer capital could be wiped out with just two months worth of claims.

The insurance and reinsurance industry is likely facing a larger industry loss from the Covid-19 pandemic than it experienced with the 2001 World Trade Center event, but at the extreme tail-end of probabilities the impact to the market could reach $140 billion, Willis Towers Watson warned today.

Speaking at the reinsurance giants annual general meeting this morning, Munich Re CEO Joachim Wenning noted that while the ultimate cost of the Covid-19 pandemic would be “substantial” he expects that for the reinsurer this will be manageable and the company may benefit from opportunities as well.

Cincinnati Financial Corporation’s CEO Steven Johnston said the company’s property catastrophe reinsurance panel will be expected to “follow our fortunes” on any Covid-19 pandemic related losses that fall under that program’s coverage for the re/insurer.

Analysts from investment bank UBS have added 50% to their estimate for the eventual insurance and reinsurance industry loss from the Covid-19 coronavirus pandemic, lifting the top-end of the range to $60 billion.

Insurance-linked securities (ILS) investors may look more favourably on the catastrophe bond in future, as its relative contract certainty compared to some collateralised reinsurance and retrocession structures means they are less likely to be impacted by unexpected losses from the Covid-19 pandemic.

A number of insurance-linked securities (ILS) fund managers have proactively marked-down some collateralised reinsurance positions, seeing a risk of potential exposure and perhaps even some losses caused by the Covid-19 pandemic.