Reinsurers' pandemic losses fading; big four remain profitable in 9M20

The big four European reinsurers are cautiously optimistic for 2021 as they expect the hardening market with risk-adjusted price increases to continue and pandemic-related claims burden to reduce progressively.

According to Fitch Ratings' reinsurance dashboard for the first nine months of 2020, pandemic-related losses have started to fade. Hannover Re, SCOR, Swiss Re and Munich Re all booked fewer COVID-19-related claims reserves in the third quarter than in the second quarter of this year.

Event cancellation covers was the only affected business line that required major adjustments to expected claims, Fitch said.

Hannover Re, Munich Re and SCOR remained profitable despite underwriting losses incurred in 9M20, while Swiss Re substantially reduced its net loss in Q3. According to Fitch, this was due to a comparatively light natural catastrophe loading and an improvement of the underlying underwriting result helped to compensate for losses related to the coronavirus crisis.

All four major reinsurers have remained well capitalised so far in 2020, maintaining their capital levels within their set target ranges, Fitch noted. This allowed for strong premium growth in reinsurance, driven by higher prices, rising demand in Asia, and an increased risk appetite.

The sector expects risk-adjusted prices in property and casualty reinsurance to rise further in 2021, with all major reinsurers cautiously optimistic on the outlook.

Fitch believes that the pandemic-related claims burden will reduce progressively due to the exclusion of pandemic covers in renewed treaties. Nevertheless, the uncertainty around ultimate losses caused by the pandemic remains high.