Zurich Insurance outlines its own COVID-19 hit

Zurich Insurance Group AG may have to pay out as much as US$750 million this year due to the coronavirus as it grapples with rising claims and volatile markets that have already triggered profit warnings at rivals.

Europe’s second-largest insurer by market value said the claims will hit its property & casualty unit, with US$280 million recognised in the first quarter. The estimate is subject to significant uncertainty, Zurich said in a statement on Thursday.

While insurers probably haven’t seen the worst of the COVID-19 crisis Zurich follows rivals AXA SA and Allianz SE in sketching out an outline of the impact. Profit across the industry will be under pressure from lower revenue and higher claims from event cancellations, bankruptcies and business interruptions, although some areas may be a bright spot, such as car insurance where less driving will result in fewer road accidents.

Germany’s Allianz in April withdrew its earnings forecast for the year due to uncertainty caused by the pandemic, while it’s giant bond-investment unit Pacific Investment Management Co. saw its worst outflows in five years when the onset of the coronavirus pandemic sent retail clients fleeing. French competitor AXA predicted a material dent to 2020 earnings.

Zurich said it’s revenues and earnings would also be hit by poor financial markets and weaker economies. Gross written premiums at the property and casualty unit rose 5% from a year earlier to US$9.68 billion.

The outbreak hit the industry “like a meteorite,” Allianz Chief Executive Officer Oliver Bäte said last month, with business disruptions across industries fuelling claims while chaotic markets cause investment values to tumble. AXA has said it expects total potential event cancellation claims related to COVID-19 is in the mid-triple digit million euros, adding that it is too early to estimate business interruption claims.

UBS analysts expect insured losses from the virus to be in a range of US$30 billion to US$60 billion. While it remains confident European insurers’ balance sheets can withstand the hit, the level of uncertainty remains high, analyst Jonny Urwin wrote last month.

Source: Insurance Business UK