Answer to Question #237351 in Mechanical Engineering for Simmi

Question #237351

9. The insurance policy of insurance companies has changed recently. What is the major change?

Expert's answer

The impact of COVID-19 on global insurance markets is largely felt through asset risks, notably capital markets volatility, and weaker premium growth prospects.

S&P Global Ratings expect most COVID-19-related losses (business interruption, event cancellation, etc.) to be picked up by reinsurers, so primary insurers' technical performance is unlikely to deteriorate materially. Strict lockdown measures helped maintain satisfactory performance, as motor and medical claims had a positive impact on loss ratios. Developed markets, particularly life ones, are likely to shrink in real terms as a result of the economic slowdown.

Developing markets, through their riskier asset allocation, will likely experience more declines in return on equity than developed markets. Ultralow interest rates mean that the most significant source of risk to insurers is the performance of investments, especially life insurers with guaranteed back books.

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