Reinsurers face highest risks from coronavirus, says A.M. Best

Analysts at AM Best believe that reinsurers could face higher levels of risk related to the ongoing Coronavirus outbreak than their primary life & health counterparts.

The rating agency noted that reinsurers typically have higher exposures to mortality and morbidity risks, and may have as much as 40% or more of required capital held for these risks before diversification.

But in an effort to minimise the concentration of their mortality and morbidity risks, global reinsurers have been broadening their risk exposures to include financial solutions, asset management solutions, and other annuity risk arrangements.

The coronavirus has infected nearly 10,000 people since first being identified by the World Health Organisation (WHO) on December 31st. The vast majority of cases are in China, particularly in the city of Wuhan where the virus is thought to have originated, with 213 people now believed to have been killed.

Currently, no deaths have been recorded outside of China, but the virus has spread to at least 22 countries, including the US, the UK, France, Australia, Japan, Canada and South Korea, sparking fears of a global crisis. Notably, the number of coronavirus cases worldwide has now surpassed that of the 2003 SARS epidemic, although the death total is currently well below the 774 documented over the roughly 6-month SARS outbreak.

Overall, AM Best believes the life & health industry remains well capitalised and in a good position to withstand the coronavirus outbreak, although it warned that conditions need to be carefully monitored. It also noted that technological advances should assist in minimising the impact, due primarily to communications and reductions in response time for care delivery.

More uncertain are the economic implications of the coronavirus, with a potential slowdown in China likely to have a knock-on effect on worldwide growth. For comparison, China’s GDP contracted by an estimated 1% in 2003 due to the SARS outbreak, which was also a coronavirus and similarly coincided with the Chinese New Year.

Source: Reinsurance News