Global Insurance Market Showed Resilience to COVID-19 Pandemic in 2020

Despite considerable volatility in financial markets resulting from the COVID-19 pandemic during the first half of 2020, the global insurance market remained both financially and operationally resilient, according to a new report.

The International Association of Insurance Supervisors (IAIS) found that the industry's resilience was aided by supervisory measures that provided operational relief as well as by monetary and fiscal support measures in certain regions, according to the association's 2020 Global Insurance Market Report.

"The COVID-19 pandemic has underscored the importance of a resilient insurance sector," Dr. Vicky Saporta, IAIS Executive Committee chair, said in a statement. "The industry has been bolstered by the reforms implemented since the 2008 financial crisis. One of those reforms, the IAIS Holistic Framework, adopted only last year, has allowed the IAIS to quickly assess the impact of COVID-19 on the global insurance sector and support global dialogue on supervisory responses."

The IAIS report shows that COVID-19's most significant impact on the insurance sector was on solvency and profitability, primarily through losses on the asset side. Still, solvency ratios generally remained above jurisdictional requirements, the IAIS reported.

Insurers' results varied greatly on the liability side, depending on their business model, according to the IAIS. Insurers involved in lines of business such as travel, event cancellation, business interruption, and pandemic/excess mortality insurance experienced a more significant impact, according to the IAIS, while insurers with more diverse portfolios were affected to a lesser extent.

The IAIS report said the pandemic's impact on liquidity has been limited, raising no immediate concerns about the sector's ability to fulfill its obligations.

The IAIS noted that the supervisory response to COVID-19 has focused largely on operational relief and insurer resilience, with measures aimed at capital preservation and enhanced risk management and reporting as well as conduct of business measures aimed at ensuring the fair treatment of customers.

The global insurance market does continue to face vulnerabilities given the uncertainty about the duration and impact of the COVID-19 crisis, according to the IAIS. Those vulnerabilities include potential decreases in the credit quality of insurers' fixed income portfolios and the impact of the extremely low yield environment.

The Global Insurance Market Report is based on data collected as part of the IAIS' Global Monitoring Exercise as well as information from IAIS members on their supervisory responses. The report can be found on the IAIS website.