Market volatility amid coronavirus outbreak to weigh on re/insurers' profitability, warns Moody's

Global re/insurers will be exposed to the coronavirus outbreak directly through a potential spike in claims and indirectly through the impact on economic growth and the resultant financial market volatility, warns Moody's Investors Service.

According to a new report, an economic slowdown triggered by the outbreak will crimp business volumes for insurers and also lead to higher claims for certain types of insurance, including trade credit and event cancellation insurance.

Moody's also expects weaker investment returns on insurers' investment portfolios, including loses on equity exposures.

"European insurers' Solvency II ratios are particularly sensitive to financial market volatility and movements in bond yields and credit. Sharp deterioration in financial markets over the past week will weigh on insurers' profitability and capitalisation," said Brandan Holmes, vice president, senior credit officer at Moody's.

For global insurers mortality levels would need to rise significantly to trigger a substantial rise in claims for life insurers, although there is still a lot of uncertainty as to the ultimate level of deaths.

Moody's expects the non-life insurers' exposure to be limited and consequently doesn't expect a significant claims impact.

The agency noted that while global reinsurers' exposure to Chinese life and health insurance, and critical illness cover in particular, has grown significantly in recent years, it remains a modest part of their overall portfolios. Life and health cover also accounts for only a small share of the wider Chinese market, which is largely savings focused.