Insurance Article, The Insurance Times 2020, The Insurance Times September 2020

Global (Re) InsurancesImpacted By Viral Pandemic Storm Events Of COVID-19

  1. INTRODUCTION

The COVID-19 PENDEMIC is Man Made Viral Catastrophe Globally impacting around 200 countries and paralyzing social as well as Economic lives of people of all ages. This is an Unparalleled Pandemic which is like a COVID-19 Pandemic Storm which has sudden sweeping and surging impacts on social life style of all everywhere. These unique Viral Pandemic Tragedies are occurring for over 9 months since December 2019. Remedial Vaccines are still in experimental stages and all affairs of individual and group life are stagnated by Distancing and Isolation as only way out to minimize its deadly impacts.

When WTC Attack losses of 11th September, 2001 occurred the Insurance Industries losses were slightly below US$ 90 BLNS – the highest Insured Losses since known history of Insurance and Reinsurance World.

But COVID-19 Pandemic is the worst Man Made Viral Catastrophe which impacts Global Economies of almost every country of the world! The Loss of Lives and the Loss of Economies by sudden Breaks applied to the Super-Fast Train of Economic activities has caused GFC Global Financial Crisis in every field of life.

Natural Catastrophes of Seismic Perils and STIF Perils have Local – Zonal – International and Intercontinental impacts e.g. Japanese Tsunami, US Hurricanes, Thai Flood etc. Even Locust swarms impacts regionally only. Manmade Catastrophes of Cyber Terrorism, Piracies and epidemics are all confined to Locations Zonally / Regionally. But COVID-19 Pandemic is a GLOBAL PANDEMIC STORM caused by Man-made virus incepting from Wuhan in China!

2. COVID-19 Causes Global Recession which can be compared to Global Recession of 1930s

The Global Insurance Premium are with a ‘ROBUST GROWTH’ up to the year 2019 but COVID-19 Recession will impact ‘Stagflations’ till 2021. Thus World Insurance and Reinsurance will witness unprecedented ‘Halting’ of all economic activities resulting from Lockdown for long term and Isolation / Distancing of People everywhere in the world, paralyzing Global Contacts by transportation through Rails, Roads, Aircrafts and Cyber Links.

A New World Economic Order seems to be in making and we live in ‘Transition Periods’ up to 2021.

Global Reinsurance Premiums for the year 2019 are selectively listed for the First 15 major economics of 2019 which cover almost 83% of Total Insurance Premium of Life and Nonlife business.

 Statement A

Macroeconomic Indicators 2019

2019 Premiums US$ BLNS
Sr. No Country MLNS Population US$ BLNS GDP % Life Non-Life Total %
1 U.S.A 328 21.532 24.75% 629 1832 2461 39.11%
2 P.R. China 1435 14.346 16.49% 329 288 617 9.80%
3 Japan 127 5103 5.87% 341 118 459 7.29%
4 Germany 83 3862 4.47% 102 142 244 3.88%
5 U.K. 67 2829 3.25% 264 102 366 5.81%
6 India 1368 2824 3.25% 80 27 107 1.70%
7 France 67 2709 3.11% 168 95 263 4.18%
8 Italy 60 2001 2.30% 124 44 168 2.67%
9 Brazil 211 1840 2.11% 41 33 74 1.18%
10 Canada 38 1736 2.00% 53 80 133 2.11%
11 Russia 146 1698 1.95% 6 16 22 0.35%
12 South Korea 52 1618 1.86% 94 80 174 2.76%
13 Spain 47 1393 1.60% 32 40 72 1.14%
14 Australia 25 1387 1.59% 22 48 70 1.11%
15 Mexico 128 1260 1.45% 14 16 30 0.48%
Total 4182 66138 76.03% 2299 2961 5260 83.60%
World Total 7693 86982 100% 2916 3376 6292 100%

 

                                                                                                Source : SIGMA Reports 4/2020

 Statement B

 Marketwise Non-Life Premium of 2019 Impact of COVID-19 Claims

 

Class US$ BLNS Non-Life Premium Estimated Reinsurance Premium Remark
Personal Motor

 

Commercial Motor

600

 

180

 

20

1. Claims will be increase for longer lasting COVID-19 Viral Pandemic events up to 2022
Personal Property

 

Commercial Property

210

 

220

 

60

2. Reinsurers pay 2019 claims covered in Reinsurances but from 2020 renewal COVID19 Pandemic Risk are excluded or covered with restrictive and prohibitive coverage
Liability

 

W.C.A

 

Engineering

200

 

60

 

20

 

 

40

3. Impacts of economic lockdowns on Investments incomes of Insurers and Reinsurers.
Marine 30 15
Aviation 5 4
Medical 1400 55
Accident & Health 270 46
Others 234 35
3376 275

 

                                                                                                Source : SIGMA Reports 4/2020

 

COVID-19 Pandemic Storm Impacts

  • Global GDP will be reduced by around 4% in 2020 and further reduced in 2021.
  • On an average global Premium are likely to reduce by 3% up to 2021. 2019 levels are likely to be resumed by 2021 end.
  • Global Financial Crisis – GFC will generated Recessionary Effects which may reset up to two years
  • Life sector will be hit hard by COVID-19 both in terms of COVID-19 and drastic reduction in Investment returns on all funds of life Insurance available for investments
  • Longer Periods of Economic Lockdowns have already paralyzed Manufacturing Industries, Entertainment Industries, Tourism, Hotels, Religious and Social congregation an specific occasion, Rail, Road, Air, Traffic Lines and Revenue of State by Economic Lockdowns, increasing Unemployment, Labor unrestTrade Wars among Giant Economies and so on.
  • Insurance Industry’s profitably is likely to be supported by hardening of Rates acceleration of New Risks in all growing in economies.
  • Global Economies may be contracting by around 4%. EURO currencies traders may be hit hard. US$ may remain static in International Trades.
  • China may suffer gradually closing down of outsourcing units of Western Economies.China loses TRUST of all countries and may suffer declines in all fields of economy
  • Around 20 largest economies may be able to recover from COVID-19 impacts but may be able to regain capacity by 95% over 2019 level.
  • Emerging Economies of Asia Pacific, African Middle Eastern and Latin American Economies will suffer drastically due to COVID-19 impacts. The Task of Economic Recoveries will be very difficult due to Lockdown and rising unemployments.
  • Lowering Interest rates will be for large periods on Investments by Insurers. Political, Economic and Military Tensions will increase between Western economies rising in the world like India, Hog Kong, Taiwan etc.
  • COVID-19 Virus impacts are likely to be longer lasting even beyond 2022.
  • Recessionary Trends may give way to STAGFLATION. Scenario i.e. Weaker Recovery in 2021 due to stagnated Premium incomes and increasing claims Ratios combining Natural Catastrophic losses along with COVID-19 Pandemic losses.
  • Global Life Premiums are likely to fall annually by 1.50% till 2021 as against 2.2% growth up to 2019.
  • Global Non-Life premium are likely to grow marginally on an average during 2020-21. Emerging Markets Non-life premium are likely to be better.
  • Personal lines business may grow but commercial line business may suffer downturns.
  • COVID-19 Losses will imply increase in Premium with highest rates and greater penetration.

Nat Cat Losses on an average $ 75 BLNS per year from2001 to 2017. They were US$ 93 BLNS in 2018, US$ 60 BLNS in 2019.

Worldwide AOG Perils losses in 2019 are US$ 176 BLNS. Ongoing COVID-19 events losses may be more than $ 300 BLNS by 2022.

  1. 7 Major Markets Total Insurers Premium as compared to 1980, 2019, and forecast for the year 2030 consequent to COVID-19 Events.

 

Market Share Forecast Amounts in US$
COUNTRY 1980 2019 2030 1980 2019 2030
1 USA 48% 39% 36% 229 2460 3660
2 China 10% 18% 617 1777
3 Japan 15% 7.3% 6.1% 75 459 621
4 U. K. 6.9% 5.8% 4% 35 366 404
5 Germany 8% 3.9% 3.5% 40 244 320
6 S. Korea 0.3% 2.8% 2.5% 2 175 258
7 India 0.4% 1.7% 2.3% 2 106 234

                                                                                    Source : SIGMA Reports 4/2020

CONCLUSION:

COVID-19 Pandemic’s Viral Storm is still ongoing and is likely to disappear by 2022. All people of the world have to learn to live with Isolation, Distancing and Sanitization in all Social, Political and Economic activities individually as well asin congregation.

The only great advantage is Pollution Free Environment everywhere! We all breathed polluted air in all metropolitan cities in the world so far

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